AGENCY & PARTNERSHIP
latter’s consent. The underlying as its exclusive general sales agent within the
1.) PURPOSE OF AGENCY
 The purpose of agency is to
extend the personality of the
principal. It enables the activity
of man which is naturally
limited in its exercise by the
impositions of his
physiological conditions to be
legally extended by permitting
him to be constructively
present in many different
places and to perform diverse
juridical acts and carry on
many different activities
through another when physical
presence is impossible or
inadvisable at the same time.
With the expansion of
commercial transactions and
the consequent increase in
business organization
conducted mainly through the
combined effort of individuals
acting in a representative
capacity, the subject of agency
has grown in importance.
 In a contract of agency, a person
binds himself to render some service
or to do something in representation
or on behalf of another with the
AUGUST 25
principle of the contract of agency is
to accomplish results by using the
services of others to do a great
variety of things like selling, buying,
manufacturing, and transporting. Its
purpose is to extend the personality
of the principal or the party for
whom another acts and from whom
he or she derives the authority to
act. It is said that the basis of
agency is representation, that is,
the agent acts for and on behalf of
the principal on matters within the
scope of his authority and said acts
have the same legal effect as if they
were personally executed by the
principal. By this legal fiction, the
actual or real absence of the principal
is converted into his legal or juridical
presence – qui facit per alium facit
per se.
ORIENT AIR SERVICE and HOTEL
REPRESENTATIVES vs. COURT OF
APPEALS (197 SCRA 645)
FACTS: American Airlines, inc, an air
carrier offering passenger and air cargo
transportation in the Phils, and Orient Air
Services and Hotel Representatives entered
into a General Sales Agency Agreement
whereby the former authorized the latter to act
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Phils for the sale of air passenger
transportation. Some of the pertinent
provisions are:
Orient Air Services shall perform these
services:
a. solicit and promote passenger traffic for the
services of American and if necessary, employ
staff competent and sufficient to do so
b. provide and maintain a suitable area in its
place of business to be used exclusively for
the transaction of the business of American
c. arrange for distribution of American’s
timetables, tariffs and promotional material to
sales agents and the general public in the
assigned territory
d. service and supervise sales agents in the
assigned territory including if required by
American the control of remittances and
commissions retained
e. hold out a passenger reservation facility to
sales agents and general public in the assigned
territory
Alleging that Orient Air had reneged
on its obligations under the Agreement by
failing to remit the net proceeds of sale in the
amount of US $ 254,400, American Air by
itself undertook the collection of the proceeds
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AGENCY & PARTNERSHIP
of tickets sold originally by Orient Air and
terminated forthwith the Agreement
American Air instituted suit against
Orient Air for Accounting with Preliminary
Attachment or Garnishment, Mandatory
Injunction and Restraining Order averring the
basis for the termination of the Agreement as
well as Orient Air’s previous record of failures
“to promptly settle past outstanding refunds of
which there were available funds in the
possession of the Orient Air to the damage and
prejudice of American Air
Trial Court ruled in favor of Orient Air
to which the Intermediate Appellate Court
(now CA) affirmed Trial Court’s decision with
modifications with respect to monetary awards
granted.
ISSUE: 1. Whether or not Orient Air is
entitled to the 3% overriding commission
2. Whether or not American Air
should reinstate Orient air as its
General Sales Agent – (related to the
subject)
RULING: 1.) Yes, Orient Air is entitled to
3% overriding commission.
It is a well settled principle that in the
interpretation of a contract, the entirety thereof
must be taken into consideration to ascertain
AUGUST 25
the meaning of its provisions. The various
stipulations in the contract must be read
together to give effect to all
The Agreement, when interpreted in
accordance with the foregoing principles,
entitles Orient Air to the 3% overriding
commission based on total revenue or as
referred to by the parties, “total flown
revenues”.
As the designated General Sales Agent
of American Air, Orient Air was responsible
for the promotion and marketing of American
Air’s services for air passenger transportation
and the solicitation of sales therefore. In return
for such efforts and services, Orient Air was to
be paid commissions of 2 kinds: first, a sales
agency commission, ranging from 7 to 8% of
tariff fares and charges from sales by Orient
Air when made on American Air ticket stock;
and second, an overriding commission of 3%
of tariff fares and charges for all sales of
passenger transportation over American Air
services.
The second type of commissions
would accrue for sales of American Air
services made not on its ticket stock but on the
ticket stock of other air carriers sold by such
carriers or other authorized ticketing facilities
or travel agents.
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In addition, it is clear from the records
that American Air was the party responsible
for the preparation of the Agreement.
Consequently, any ambiguity in this “contract
of adhesion” is to be taken “contra
proferentem” –construed against the party who
cause the ambiguity and could have avoided it
by the exercise of a little more care.
2.) It is believed, however, that
respondent appellate court erred in affirming
the rest of the decision of the trial court,
particularly to the lower court's decision
ordering American Air to "reinstate defendant
as its general sales agent for passenger
transportation in the Philippines in accordance
with said GSA Agreement."
By affirming this ruling of the trial
court, respondent appellate court, in effect,
compels American Air to extend its
personality to Orient Air. Such would be
violative of the principles and essence of
agency, defined by law as a contract whereby
"a person binds himself to render some
service or to do something in representation
or on behalf of another, WITH THE
CONSENT OR AUTHORITY OF THE
LATTER . (emphasis supplied) 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
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AGENCY & PARTNERSHIP
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. The Agreement itself
between the parties states that "either party
may terminate the Agreement without
cause by giving the other 30 days' notice by
letter, telegram or cable." (emphasis supplied)
The Court, therefore, set aside the portion of
the ruling of the respondent appellate court
reinstating Orient Air as general sales agent of
American Air.
***The Court held that the purpose of
every contract of agency is the ability, by legal
fiction, to extend the personality of the
principal through the facility of the agent; but
that the same can only be effected with the
consent of the principal.
Eurotech vs Cuizon (521 SCRA 584)
Facts: Petitioner sold to Impact Systems, a
sole proprietorship owned by ERWIN Cuizon,
various products allegedly amounting to
(P91,338.00). Subsequently, respondents
sought to buy from petitioner one unit of
sludge pump valued at P250,000.00 with
respondents making a down payment of fifty
thousand pesos (P50,000.00). When the sludge
pump arrived from the United Kingdom,
petitioner refused to deliver the same to
AUGUST 25
respondents without their having fully settled
their indebtedness to petitioner. Because of
this, respondent EDWIN, brother of ERWIN
Cuizon, and Alberto de Jesus, general
manager of petitioner, executed a Deed of
Assignment of receivables in favor of
petitioner from Toledo Power Corp. in the
amount of P365,000.00. Thereafter, the sludge
pump was delivered. But allegedly, despite the
existence of the Deed of Assignment,
respondent still proceeded to collect from
Toledo Power Company the amount of P365k.
Alarmed, petitioner made several demands to
the respondent and after the final demand
letter, petitioner instituted a complaint for sum
of money and damages against herein
respondents.
By way of special and affirmative defenses,
respondent EDWIN alleged that he is not a
real party in interest in this case. According to
him, he was acting as mere agent of his
principal, which was the Impact Systems, in
his transaction with petitioner and the latter
was very much aware of this fact. The trial
court rendered a decision directing the
defendant EDWIN B. Cuizon be dropped as
party defendant to which the Court of Appeals
affirmed. Petitioner now contends that the
Court of Appeals failed to appreciate the effect
of ERWIN’s act of collecting the receivables
from the Toledo Power Corporation
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notwithstanding the existence of the Deed of
Assignment signed by EDWIN on behalf of
Impact Systems. While said collection did not
revoke the agency relations of respondents,
petitioner insists that ERWIN’s action
repudiated EDWIN’s power to sign the Deed
of Assignment. As EDWIN did not
sufficiently notify it of the extent of his
powers as an agent, petitioner claims that he
should be made personally liable for the
obligations of his principal.
Issue: Whether or not EDWIN B. Cuizon
should be made liable as a party defendant?
Ruling: No, since EDWIN did not act in
excess of the authority granted by his
principal. The powers of an agent are
particularly broad in the case of one acting as
a general agent or manager; such a position
presupposes a degree of confidence reposed
and investiture with liberal powers for the
exercise of judgment and discretion in
transactions and concerns which are incidental
or appurtenant to the business entrusted to his
care and management. In the absence of an
agreement to the contrary, a managing agent
may enter into any contracts that he deems
reasonably necessary or requisite for the
protection of the interests of his principal
entrusted to his management.
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AGENCY & PARTNERSHIP
There is, therefore, no doubt in our mind that
respondent EDWIN’s participation in the
Deed of Assignment was "reasonably
necessary" to protect the business of his
principal since it can be easily assumed that
the company desperately needed the sludge
pump. Had he not acted in the way he did, the
business of his principal would have been
adversely affected and he would have violated
his fiduciary relation with his principal.
As we declare that respondent EDWIN acted
within his authority as an agent, who did not
acquire any right nor incur any liability arising
from the Deed of Assignment, it follows that
he is not a real party in interest who should be
impleaded in this case. A real party in interest
is one who "stands to be benefited or injured
by the judgment in the suit, or the party
entitled to the avails of the suit.” In this
respect, we sustain his exclusion as a
defendant in the suit before the court a quo.
Doles vs. Angeles (492 SCRA 407)
FACTS: The respondent filed a complaint for
specific performance with damages against the
petitioner. Respondent alleged that petitioner
was indebted to her as a personal loan
amounting to P405, 530.00 representing the
principal amount and interest.
AUGUST 25
Petitioner denied that she borrowed money
from the respondent and averred that she
referred her friends to respondent whom she
knew to be engaged in the business of lending
money, in exchange for personal checks
through her capitalist, Arsenio Pua. She
alleged that her friends borrowed money from
the respondent and issued personal checks but
the checks bounced for insufficiency of funds.
Despite her efforts to assist respondent, she
could no longer locate them; that she was
forced to issue eight checks amounting to
P350, 000 to answer for the bounced checks of
the borrowers she referred; that prior to the
issuance of the checks she informed the
respondent that they were not sufficiently
funded but the latter nonetheless deposited the
checks but they were subsequently
dishonored. She was forced by respondent to
execute an Absolute Deed of Sale over her
property in Bacoor, Cavite to avoid criminal
prosecution.
ISSUE: 1)Whether or not the petitioner can
be considered as debtor of the respondent.
2)Whether or not an agent who was
not authorized by the principal to
collect debt on his behalf could
directly collect from the debtor.
HELD: Both no. Petitioner knew that the
financier of respondent is Pua; and respondent
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knew that the borrowers are friends of
petitioner. The Court has affirmed that, under
1868 of the Civil Code, the basis of agency is
representation. In the case at bar, both
petitioner and respondent have undeniably
disclosed to each other that they are
representing someone else, so both of them are
estopped to deny the same. It is sufficient that
petitioner disclosed to respondent that the
former was acting in behalf of her principal,
her friends whom she referred to respondents.
For an agency to arise, it is not necessary that
the principal personally encounter the third
person with whom the agent interacts. The
principal need not personally know or meet
the third persons. Precisely, the purpose of
agency is to extend the personality of the
principal through the facility of the agent. And
since petitioner, being an agent was not
authorized by the principal to collect debt in
his behalf, and respondent was acting only as
an agent with regards to the debtors, the sale
of the respondent’s property having been
predicated on the loan is void for lack of
consideration.
2.) What is the nature of agency?
The word “agency” when used in its broadest
meaning is both a contract and a
representative relation.
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AGENCY & PARTNERSHIP
Since it is a contract, it is essential that the
minds of the parties should meet in making it.
Like other contracts, the following requisites
must concur:
a. consent of the contracting parties
b. object which is the subject matter of the
contract; and
c. cause which is established.
The principal must intend that the agent shall
act for him, the agent must intend to accept the
authority and act on it, and the intention of the
parties must find expression either in words or
conduct betwwen them.
Although the agency is usually a contractual
one, either expressed or implied, based upon a
consideration, this is not necessarily so; that
is, the relationship may be created by
operation of law, or a person who acts for
another as principal may do so gratuitously.
RALLOS VS FELIX GO CHAN& SONS
REALTY (81 SCRA251)
FACTS:
Concepcion and Gerundia both surnamed
Rallos were sisters and registered co-owners
AUGUST 25
of a parcel of land known as lot no. 5983 of
Cadastral Survey of Cebu covered by TCT
No. 11116 of Registry of Cebu.On April 21,
1954 the sisters executed a special power of
attorney in favor of their brother, Simeon
Rallos, authorizing him to sell for and in their
behalf Lot no. 5983. On March 3, 1955,
Concepcion Rallos died.
In September 12, 1955 Simeon Rallos sold the
undivided shares of his sisters in Lot no. 5983
to Felix Go Chan & Sons Realty Corporation
for the sum of P 10,686.90.The deed of sale
was registered in the Registry of Deeds of
Cebu and TCT No. 11116 was cancelled and a
new TCT no. 12989 was issued in favour of
the Vendee.
In May 18, 1956, Ramon Rallos as
administrator of Intestate Estate of
Concepcion Rallos filed a complaint praying
that:
1. Sale of the undivided share of the
deceased Concepcion in Lot no.
5983 be unenforceable, and said
share be reconveyed to her estate.
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2. Certificate of Title issued in the
name of Felix Go Chan & Sons
Realty Corporation be cancelled
and another Title be issued in the
names of the Corporation and the
Intestate estate of Concepcion
Rallos in equal undivided shares
3. Plaintiff be indemnified by way of
attorney’s fees and payment of cost
of suit.
Named party defendants were Felix Go Chan
Realty Corp, Simeon Rallos, and the Register
of Deeds of Cebu, but subsequently , the latter
was dropped from the complaint.
While the case was pending in the trial court,
both Simeon and Gerundia died and they were
substituted by the respective administrators of
their estates.
TRIAL COURT’S RULING: ( Later affirmed
by SC)
CFI:
[Plaintiff’s Complaint]
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AGENCY & PARTNERSHIP
1. Sale of land was null and void insofar
as the one-half pro-indiviso share of
Concepcion Rallos
2. Ordered the issuance of new TCTs to
respondent corporation and the estate
of Concepcion in the proportion of
½ share each pro-indiviso and the
payment of attorney’s fees and cost of
litigation[Respondent filed cross claim
against Simon Rallos
3. Juan T. Borromeo, administrator of
the Estate of Simeon Rallos was
ordered to paydefendant the price of
the ½ share of the land (P5,343.45)
plus attorney’s fees[Borromeo filed a
third party complaint against Josefina
Rallos, special administratrix
of theEstate of Gerundia]
4. Dismissed without prejudice to filing
either a complaint against the
regularadministrator of the Estate of
Gerundia Rallos or a claim in the
AUGUST 25
Intestate-Estate of Cerundia Rallos,
covering the same subject-matter
CA:
CFI Decision reversed, upheld the sale
of Concepcion’s share.
MR: denied.
Issues:
1) WON sale was valid although it
was executed after the death of the
principal,Concepcion.
2) WON sale fell within the exception
to the general rule that
death extinguishes the authority of
the agent
3) WON agent’s knowledge of the
principal’s death is a material
factor.
4) WON petitioner must suffer the
consequence of failing to annotate
a notice of death in the title (thus
there was good faith on the part
of the Respondent vendee)
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Held/Ratio:
(Court discussed relevant principles first)
Relationship of Agency (concept arising from
principles under Art 13171 and 14032)- one
party, caged the principal (mandante),
authorizes another, called the agent
(mandatario), to act for and in his behalf in
transactions with third persons.
-derivative in nature, power emanating
from principal
-agent’s acts are acts of the principal
 Essential Elements:
(1) there is consent, express or implied of
the parties to establish the relationship;
(2) the object is the execution of a juridical
act in relation to a third person;
(3) the agents acts as a representative and
not for himself, and
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AGENCY & PARTNERSHIP
(4) the agent acts within the scope of his
authority.
 Extinguishment
o Generally: among others3, By
the death, civil interdiction,
insanity or insolvency of the
principal or of the agent
- death of the principal effects instantaneous
and absolute revocation of the authority of the
agent
o Exceptions:
 (Art. 1930) 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.
 (Art. 1931) agent acted
without knowledge of the
pricipal’s death and that the
third person was in good faith
(both these reqs should be
present)
AUGUST 25
IN THE CASE AT BAR:
1) Sale was void.
 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 (Art. 1317 of the
Civil Code).
 Simon’s authority as agent was
extinguished upon Concolacion’s
death
2) The sale did not fall under the
exceptions to the general rule that
death ipso jure extinguishes the
authority of the agent
o Art. 1930 inapplicable: SPA in
favor of Simon Rallos was not
coupled with interest
o Art. 1931 inapplicable:
 Simon Rallos knew (as can be
inferred from his pleadings)
of principal Concepcion’s
death
 For Art 1931 to apply, both
requirements must be present
ZHY
3) Yes, agent’s knowledge of principal’s
death is material.
Respondent asserts that: there is no provision
in the Code which provides that whatever is
done by an agent having knowledge of the
death of his principal is void even with respect
to third persons who may have contracted with
him in good faith and without knowledge of
the death of the principal
Court says: this contention ignored the ignores
the existence of the general rule enunciated in
Article 1919 that the death of the principal
extinguishes the agency. Article 1931, being
an exception to the general rule, is to be
strictly construed.
4) NO, the Civil Code does not impose a
duty upon the heirs to notify the agent
or others of the death of the principal.
 If revocation was by the act of the
principal: a general power which
does not specify the persons to whom
represents' on should be made, it is
the general opinion that all acts,
executed with third persons who
contracted in good faith, Without
knowledge of the revocation, are
valid.
 BUT, if revocation was due to death
of the principal: extinguishment, by
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AGENCY & PARTNERSHIP
operation of law, is instantaneous
without the need for notification to
the parties concerned.
5) No.
 Laws on agency, the terms of which
are clear and unmistakable leaving no
room for an interpretation contrary to
its tenor, should apply, the law
provides that death of the principal
ipso jure extinguishes the authority of
the agent to sell rendering the sale to
a third person in good faith
unenforceable unless at the agent had
no knowledge of the principal’s death
at that time (exception under Art.
1931)
Dispositive: CA Decision reversed, CFI
decision affirmed. Sale was null and void.
LOADMASTERS CUSTOMS SERVICES
INC., vs. GLODEL BROKERAGE
CORPORATION ( 639 SCRA 69)
FACTS
AUGUST 25
 R&B Insurance issued a marine policy
in favor of Columbia to insure the
shipment of 132 bundles of electric
copper cathodes against all risks.
 When the cargoes arrived at pier 10,
North Harbor, Manila, Columbia
engaged the services of Glodel for the
release and withdrawal of the cargoes
from the pier and its subsequent
delivery to its warehouses/plants.
 Glodel, in turn, engaged the services of
Loadmasters for the use of its delivery
trucks to transport the cargoes to
Columbia’s warehouses/plants in
Bulacan and Valenzuela City.
 The goods were loaded into 12 trucks
owned by Loadmasters and driven by
its employed drivers. 6 of which were
to be delivered to Bulacan and the
other 6 to Valenzuela. En route, one of
the trucks headed to bulacan failed to
deliver its cargo. Later on, the truck
was recovered but without the cargo.
 Columbia filed with R&B Insurance a
claim for insurance indemnity which
the latter paid. After which, R&B
Insurance filed a claim for damages
against both Glodel and Loadmasters
before the RTC.
ZHY
 RTC held Glodel liable for damages
and dismissed Loadmaster’s
counterclaim.
 On appeal, CA held that Loadmasters
is liable to Glodel as it is an agent of
the latter.
 Loadmasters hence filed a petition for
review on certiorari before the SC
ISSUE
 Whether Loadmasters can be
considered as an agent of Glodel.
HELD
 No. Loadmasters is not an agent of
Glodel.
 Article 1868 of the Civil Code
provides that: "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."
 Loadmasters never represented Glodel.
Neither was it ever authorized to make
such representation. It is a settled rule
that the basis for agency is
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AGENCY & PARTNERSHIP
representation, that is, the agent acts
for and on behalf of the principal on
matters within the scope of his
authority and said acts have the same
legal effect as if they were personally
executed by the principal. On the part
of the principal, there must be an
actual intention to appoint or an
intention naturally inferable from his
words or actions, while on the part of
the agent, there must be an intention to
accept the appointment and act on it.
3.) Explain the concept of
representation.
Article 1868, Civil Code: 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.
The basis of agency is representation. On the
part of the principal, there must be an actual
intention to appoint or an intention naturally
inferable from his words or actions; and on the
part of the agent, there must be an intention to
accept the appointment and act on it, and in
the absence of such intent, there is generally
no agency. (Victorias Milling Co., Inc. vs.
Court of Appeals)
AUGUST 25
4.) Explain the control factor in
agency.
A Prinipal-Agent relationship to exist, the
following should be present:
(i) Assent. Assent means an informal
agreement between the principal, who
has capacity, and the agent.
(ii) Benefit. The agent's conduct must
be for the principal's benefit.
(iii) Control. The principal must
have the right to control the agent
by having the power to supervise
the manner of its performance.
Consideration is not necessary for the
creation of an agency relationship
and, absent an express statutory
provision to the contrary, neither is a
writing.
Any person may be an agent, even a
minor or a person with minimal mental
competency.
A person is not required to have
contractual capacity to act as an
agent.
5.) What are the elements of agency?
The elements of a contract of agency
are: (1) consent, express or implied, of the
parties to establish the relationship; (2) the
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object is the execution of a juridical act in
relation to a third person; (3) the agent acts as
a representative and not for himself; (4) the
agent acts within the scope of his authority.
RALLOS VS. FELIX GO CHAN &
SONS REALTY CORP ( 81 SCRA
251)
FACTS: Concepcion and Gerundia Rallos
were sisters and registered co-owners of a
parcel of land known as Lot No. 5983. In
1954, they executed a special power of
attorney in favor of their brother, Simeon
Rallos, authorizing him to sell for and in their
behalf the aforementioned parcel of land. On
March 1955, Concepcion Rallos died. On
September 1955, Simeon Rallos sold the
undivided shares of his sisters in lot 5983 to
Felix Go Chan and Sons Realty Corporation.
The deed of sale was registered and the
previous TCT was cancelled.
On May 1956, Ramos Rallos, as administrator
of the Intestate Estate of Concepcion Rallos,
filed a complaint with the CFI of Cebu,
praying (1) that the sale of the undivided share
of the deceased Concepcion Rallos be
declared unenforceable, and said share be
reconveyed to her estate; (2) that the TCT
issued in the name of Felix Go Chan and Sons
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AGENCY & PARTNERSHIP
Realty Corporation be cancelled; and (3) that
the plaintiff be indemnified by way of
attorney’s fees and payment of costs of suit.
The trial court rendered judgment declaring
the deed of sale null and void, insofar as the
one-half pro-indiviso share of Concepcion
Rallos in the property in question, and
sentencing Juan
Borromeo, the administrator of the estate of
Simeon Rallos, to pay Felix Go Chan and
Sons Realty Corporation the sum representing
the price of one-half of the lot. The appellate
court reversed the decision and sustained the
sale.
ISSUE: Whether or not the sale of the agent
of the principal’s property after the latter’s
death is valid
HELD: NO. The general rule in Article 1919
of the NCC is that death is one of the causes
for the extinguishment of agency. There being
an integration of the personality of the
principal into that of the agent, it is not
possible for the representation to continue
once the death of either is established. There
are certain exceptions, however, Article 1931
being one of them. Under this provision, an
act done by the agent after the death of the
principal is valid and effective if two
conditions concur: (1) the agent acted without
AUGUST 25
knowledge of the death of the principal; and
(2) that the third person who contracted with
the agent acted in good faith. But because it
was established that Simeon Rallos had
knowledge of the death of his principal when
he made the sale, Article 1931 will not apply.
The general rule shall apply then that any act
of an agent after the death of his principal is
void ab initio. Simeon Rallos’ actof selling the
share of Concepcion after her death is
therefore null and void.
AGENCY: The relationship of agency is
whereby one party, called the principal
(mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf
in transactions with third persons. The
essential elements of agency are: (1) there is
consent, express or implied of the parties to
establish the relationship; (2) the object is the
execution of a juridical act in relation to a
third person; (3) the agents acts as a
representative and not for himself, and (4) the
agent acts within the scope of his authority.
Agency is basically personal representative,
and derivative in nature. The authority of the
agent to act emanates from the powers granted
to him by his principal; his act is the act of the
principal if done within the scope of the
authority. Qui facit per alium facit se. "He
who acts through another acts himself".
BORDADOR VS LUZ (283 SCRA 374)
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FACTS: The petitioners question the decision
of the trial court which was affirmed by the
Court of Appeals concerning the acquittal of
the respondent spouses on the ground that
Deganos, Brigida Luz’ brother, is not an agent
of the respondent spouses.
Petitioners are in the business of purchase and
sale of jewelry and respondent Brigida D. Luz,
also known as Aida D. Luz, was their regular
customer. On several occasions during the
period from April 27, 1987 to September 4,
1987, respondent Deganos, received several
pieces of gold and jewelry from petitioners
amounting to P382,816.00. These items and
their prices were indicated in seventeen
receipts covering the same. Eleven of the
receipts stated that they were received for a
certain Evelyn Aquino, a niece of Deganos,
and the remaining six indicated that they were
received for Brigida D. Luz.
Only fifty three thousand pesos was remitted
by Deganos and for the insufficiency, the
petitioners seek the help of the Barangay. The
agreement in the barangay was in vain which
resulted to the institution of the present civil
case in question. The spouses was made
respondents to the civil case because Deganos
is there agent as alleged by the petitioners.
ISSUE: WON respondent spouses are liable
to petitioners claim despite the fact that the
10
AGENCY & PARTNERSHIP
evidence does not show that they signed any
of the subject receipts or authorized Deganos
to receive the items of jewelry on their behalf.
HELD: No, respondent spouses are NOT
liable to petitioners. The basis for agency is
representation. Here, there is no showing that
Brigida consented to the acts of Deganos or
authorized him to act on her behalf, much less
with respect to the particular transactions
involved. Petitioners attempt to foist liability
on respondent spouses through the supposed
agency relation with Deganos is groundless
and ill-advised.
Besides, it was grossly and inexcusably
negligent of petitioners to entrust to Deganos,
not once or twice but on at least six occasions
as evidenced by six receipts, several pieces of
jewelry of substantial value without requiring
a written authorization from his alleged
principal. A person dealing with an agent is
put upon inquiry and must discover upon his
peril the authority of the agent.
The records show that neither an express nor
an implied agency was proven to have existed
between Deganos and Brigida D. Luz.
Evidently, petitioners, who were negligent in
their transactions with Deganos, cannot seek
relief from the effects of their negligence by
conjuring a supposed agency relation between
AUGUST 25
the two respondents where no evidence
supports such claim.
REFER TO:
NCC, Art. 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.
Sps. Viloria vs. Constinental Airlines
(G.R. No. 188288 Jan. 16, 2012)
Facts: Spouses Viloria purchased two round
tickets, from California to New Jersey on
board Continental Airlines, from Holiday
Travel through the latter’s travel agent
Margaret Mager. The spouses agreed to buy
the said tickets after Mager informed them that
there were no available seats at AMTRAK.
However, the spouses learned that the train
trip (AMTRAK) wasn’t fully booked and so
they request for a refund for the plane tickets.
The spouses filed their request with the CAI’s
office alleging that they were misled by Mager
into buying the plane tickets. CAI refused to
refund the said tickets and so the spouses filed
a case against CAI. The RTC ruled in favor of
the spouses but the CA reversed the ruling
stating that CAI cannot be held liable for
Mager’s act in the absence of any proof that a
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principal-agent relationship existed between
CAI and Holiday Travel.
Issue: WON a principal-agent relationship
exists between CAI and Holiday Travel.
Held: Yes. In Rallos vs. Felix Go Chan &
Sons Realty Corporation the Court explained
the nature of an agency and spelled out the
essential elements thereof: Out of the above
given principles, sprung the creation and
acceptance of the relationship of agency
whereby one party, called the principal,
authorizes another, called the agent, to act for
and in his behalf in transactions with third
persons. The essential elements of agency
are: (1) there is consent, express or implied
of the parties to establish the relationship;
(2) the object is the execution of a juridical
act in relation to a third person; (3) the
agent acts as a representative and not for
himself, and (4) the agent acts within the
scope of his authority. Agency is basically
personal, representative, and derivative in
nature. The authority of the agent to act
emanates from the powers granted to him by
his principal; his act is the act of the principal
if done within the scope of the authority. Qui
facit per alium facit se. “He who acts through
another acts himself.”
Contrary to the findings of the CA, all the
elements of an agency exists in this case. The
11
AGENCY & PARTNERSHIP
first and second elements are present as CAI
does not deny that it concluded an agreement
with Holiday Travel, whereby Holiday Travel
would enter into contracts of carriage with
third persons on CAI’s behalf. The third
element is also present as it is undisputed that
Holiday Travel merely acted in a
representative capacity and it is CAI and not
Holiday Travel who is bound by the contracts
of carriage entered into by Holiday Travel on
its behalf. The fourth element is also present
considering that CAI has not made any
allegation that Holiday Travel exceeded the
authority that was granted to it.
APEX MINING CO. INC. vs.
SOUTHEAST MINDANAO GOLD
MINING CORP ET. AL (492 SCRA 355)
FACTS: The case involves the “Diwalwal
Gold Rush Area” (Diwalwal), a rich tract
of mineral land located inside the Agusan-
Davao-Surigao Forest Reserve in Davao del
Norte and Davao Oriental.
Since the early 1980s, Diwalwal has
been stormed by conflicts brought about by
numerous mining claims over it. On March
10, 1986, Marcopper Mining Corporation
(MMC) was granted an Exploration Permit
(EP 133) by the Bureau of Mines and
Geo-Sciences (BMG). A long battle ensued
between Apex and MMC with the latter
AUGUST 25
seeking the cancellation of the mining
claims of Apex on the ground that such
mining claims were within a forest
reservation (Agusan-Davao-Surigao Forest
Reserve) and thus the acquisition on mining
rights should have been through an
application for a permit to prospect with the
BFD and not through registration of a DOL
with the BMG.
When it reached the SC in 1991, the
Court ruled against Apex holding that the area
is a forest reserve and thus it should have
applied for a permit to prospect with the BFD.
On February 16 1994, MMC assigned all its
rights to EP 133 to Southeast Mindanao Gold
Mining Corporation (SEM), a domestic
corporation which is alleged to be a 100%-
owned subsidiary of MMC. EP 133 is subject
to the following terms and conditions :
xxx 6. That this permit shall be for the
exclusive use and benefit of the permittee or
his duly authorized agents and shall be used
for mineral exploration purposes only and for
no other purpose. xxx
Subsequently, BMG registered
SEM’s Mineral Production Sharing
Agreement (MPSA) application and the Deed
of Assignment. Several oppositions were filed.
The Panel of Arbitrators created by the DENR
upheld the validity of EP 133. During the
ZHY
pendency of the case, DENR AO No.
2002-18 was issued declaring an emergency
situation in the Diwalwal Gold Rush Area
and ordering the stoppage of all mining
operations therein.
ISSUE: Whether or not SEM is an agent of
MMC?
RULING: NO. SEM is not an agent of MMC.
Condition number 6 categorically
states that the permit shall be for the exclusive
use and benefit of MMC or its duly authorized
agents. While it may be true that SEM, the
assignee of EP 133, is a 100% subsidiary
corporation of MMC, records are bereft of any
evidence showing that the former is the duly
authorized agent of the latter. For a contract of
agency to exist, it is essential that the principal
consents that the other party, the agent, shall
act on its behalf, and the agent consents so as
to act. In the case of Yu Eng Cho v. Pan
American World Airways, Inc., this Court had
the occasion to set forth the elements of
agency, viz:
(1) consent, express or implied, of the parties
to establish the relationship;
(2) the object is the execution of a juridical act
in relation to a third person;
12
AGENCY & PARTNERSHIP
(3) the agent acts as a representative and not
for himself;
(4) the agent acts within the scope of his
authority.
The existence of the elements of
agency is a factual matter that needs to be
established or proven by evidence. The burden
of proving that agency is extant in a certain
case rests in the party who sets forth such
allegation. This is based on the principle that
he who alleges a fact has the burden of
proving it. It must likewise be emphasized that
the evidence to prove this fact must be clear,
positive and convincing.
In the instant Petitions, it is incumbent
upon either MMC or SEM to prove that a
contract of agency actually exists between
them so as to allow SEM to use and benefit
from EP 133 as the agent of MMC. SEM did
not claim nor submit proof that it is the
designated agent of MMC to represent the
latter in its business dealings or undertakings.
SEM cannot, therefore, be considered as an
agent of MMC which can use EP 133 and
benefit from it. Since SEM is not an
authorized agent of MMC, it goes without
saying that the assignment or transfer of the
permit in favor of SEM is null and void as it
directly contravenes the terms and conditions
of the grant of EP 133.
AUGUST 25
Furthermore, the concept of agency is
distinct from assignment. In agency, the agent
acts not on his own behalf but on behalf of his
principal. While in assignment, there is total
transfer or relinquishment of right by the
assignor to the assignee. The assignee takes
the place of the assignor and is no longer
bound to the latter.
Bearing in mind the just articulated
distinctions and the language of the Deed of
Assignment, it is readily obvious that the
assignment by MMC of EP 133 in favor of
SEM did not make the latter the former’s
agent. Such assignment involved actual
transfer of all rights and obligations MMC
have under the permit in favor of SEM, thus,
making SEM the permittee. It is not a mere
grant of authority to SEM, as an agent of
MMC, to use the permit. It is a total
abdication of MMC’s rights over the permit.
Hence, the assignment in question did not
make SEM the authorized agent of MMC to
make use and benefit from EP 133.
The condition stipulating that the
permit is for the exclusive use of the permittee
or its duly authorized agent is not without any
reason. Exploration permits are strictly
granted to entities or individuals possessing
the resources and capability to undertake
mining operations. Without such a condition,
non-qualified entities or individuals could
ZHY
circumvent the strict requirements under the
law by the simple expediency acquiring the
permit from the original permittee.
We cannot lend recognition to the
Court of Appeals’ theory that SEM, being a
100% subsidiary of MMC, is automatically an
agent of MMC.
A corporation is an artificial being
created by operation of law, having the right
of succession and the powers, attributes, and
properties expressly authorized by law or
incident to its existence. It is an artificial being
invested by law with a personality separate
and distinct from those of the persons
composing it as well as from that of any other
legal entity to which it may be related.
Resultantly, absent any clear proof to the
contrary, SEM is a separate and distinct entity
from MMC.
Litonjua vs Eternit Corp. (490 SCRA
204)
Facts: The Eternit Corporation (EC)
manufactures roofing materials and pipe
products. Ninety (90%) percent of the shares
of stocks of EC were owned by Eteroutremer
S.A. Corporation (ESAC), a corporation
registered under the laws of Belgium. Jack
Glanville was the General Manager and
President of EC, while Frederick Delsaux was
13
AGENCY & PARTNERSHIP
the Regional Director for Asia of ESAC. In
1986, because of the political situation in the
Philippines the management of ESAC wanted
to stop its operations and to dispose their 8
parcels of land located in Mandaluyong City.
They engaged the services of realtor/broker
Lauro G. Marquez. Marquez thereafter offered
the land to Eduardo B. Litonjua, Jr. for
P27,000,000.00. Litonjua counter offered
P20,000,000.00 cash. Marquez apprised
Glanville & Delsaux of the offer. Delsaux sent
a telex stating that, based on the
"Belgian/Swiss decision," the final offer was
"US$1,000,000.00 and P2,500,000.00 to cover
all existing obligations prior to final
liquidation. The Litonjua brothers deposited
US$1,000,000.00 with the Security Bank &
Trust Company, and drafted an Escrow
Agreement to expedite the sale. Meanwhile,
with the assumption of Corazon C. Aquino as
President, the political situation improved.
Marquez received a letter from Delsaux that
the ESAC Regional Office decided not to
proceed with the sale. When informed of this,
the Litonjuas, filed a complaint for specific
performance and payment for damages on
account of the aborted sale. Both the trial court
and appellate court rendered judgment in favor
of defendants and dismissed the complaint.
The lower court declared that since the
authority of the agents/realtors was not in
AUGUST 25
writing, the sale is void and not merely
unenforceable.
Issue: WON there was already a perfected
contract of sale of the parcels of land that
would in effect make the respondents in
default and therefore liable for damages?
Ruling: None. Respondents maintain that
Glanville, Delsaux and Marquez had no
authority from the stockholders of EC and its
Board of Directors to offer the properties for
sale to the petitioners. Petitioners assert that
there was no need for a written authority from
the Board of Directors of EC for Marquez to
validly act as broker. As broker, Marquez was
not an ordinary agent because his only job as a
broker was to look for a buyer and to bring
together the parties to the transaction. He was
not authorized to sell the properties; hence,
petitioners argue, Article 1874 of the New
Civil Code does not apply.
A corporation is a juridical person separate
and distinct from its stockholders and is not
affected by the personal rights, obligations and
transactions of the latter. It may act only
through its board of directors or, when
authorized by its board resolution, through its
officers or agents. The general principles of
agency govern the relation between the
corporation and its officers or agents, subject
to the articles of incorporation, by-laws, or
ZHY
relevant provisions of law. Agency may be
oral unless the law requires a specific form.
However, to create or convey real rights
over immovable property, a special power
of attorney is necessary. Thus, when a sale
of a piece of land or any portion thereof is
through an agent, the authority of the latter
shall be in writing, otherwise, the sale shall
be void. In this case, the petitioners failed to
adduce in evidence any resolution of the
Board of Directors of EC empowering
Marquez, Glanville or Delsaux as its agents, to
sell, let alone offer for sale, for and in its
behalf, the eight parcels of land owned by it.
Moreover, the evidence of petitioners shows
that Adams and Glanville acted on the
authority of Delsaux, who, in turn, acted on
the authority of ESAC, through its Committee
for Asia, and the Belgian/Swiss component of
the management of ESAC. The offer of
Delsaux emanated only from the
"Belgian/Swiss decision," and not the entire
management or Board of Directors of ESAC.
While it is true that petitioners accepted the
counter-offer of ESAC, EC was not a party to
the transaction between them; hence, EC was
not bound by such acceptance. Decision of the
lower court is affirmed.
6.) Who are the parties to the
contract of agency?
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AGENCY & PARTNERSHIP
PRINCIPAL – The person represented
(mandante)
AGENT – The person who acts for and in
representation of another (mandatario)
7.) Must the parties in an agency
arrangement be capacitated?
 Capacity of the Parties:
1. Principal
a) He may be a natural or a juridical person contract must, generally, either be parties to
b) He must be capacitated. The rule is
if a person is capacitated to act for
himself or his own right, he can act
through an agent.
i. The agent is not liable where he
was ignorant of the principal’s
incapacity.
2. Agent
a) Insofar as the third persons are
concerned, it is enough that the
principal is capacitated.
b) Insofar as his obligations to his
principal are concerned, the agent
must be able to bind himself.
c) But as an agent, some mental
capacity is necessary, so, those
AUGUST 25
who are absolutely incapacitated
(ex. Insane persons) cannot be
agents.
8.) Are agents real party-in-interest
An agent of the seller is not a party to
the contract of sale between his principal and
the buyer; 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 the
said contract. (Uy vs Roxas)
The agent has neither rights nor
liabilities as agains the third party; he cannot
thus sue or be sued on the contract. (Angeles
vs PNR)
Uy and Roxas vs CA (G.R NO.
120465)
FACTS: William Uy and Rodel Roxas
(petitioners) are agents authorized to sell 8
parcels of land in Benguet. The petitioners
offered to sell the parcels of land to NHA for a
housing project. On 1989, NHA passed a
resolution approving the acquisition of the
said lands and they executed Deed of Absolute
Sale. However, only 5 out of 8 lands were
paid for by NHA because of a report from
DENR that the remaining area is located at an
ZHY
active landslide and are therefore not
conducive for housing. NHA issued a
resolution cancelling the sale of the remaining
lands and offered P1.225 million to the
landowners. For such reason, Uy and Roxas
filed a complaint for damages against NHA.
ISSUE: Whether or not Uy and Roxas are real
parties-in-interest.
HELD: No. They are not parties-in-interest
because they are merely agents of their
principals. An action shall be prosecuted in
the name of the party who, by the substantive
law, has the right sought to be enforced. Uy
and Roxas are not parties to the contract of
sale between their principals and NHA. They
are mere agents of the owners of the land
subject of the sale. As agents, they only render
some service or do something in
representation or in behalf of the principals.
The rendering of such service did not make
them parties to the contract of sale executed in
behalf of the latter. Since a contract may be
violated only by the parties thereto as against
each other, the real parties-in-interest may be
either the plaintiff or defendant.
ANGELES VS. PNR (G.R. NO.
150128)
15
AGENCY & PARTNERSHIP
FACTS: On May 5, 1980, respondent
Philippone National Railways (PNR)
informed Gaudencio Romualdez that it
has accepted his offer to buy PNR’s
scrap/unserviceable rails in Del
Carmen, Lubao, Pampanga. After
paying the purchase price, Romuladez
addressed a letter to PNR authorizing
Lizette R. Wijanco-Angeles to be his
lawful representative in the withdrawal
of scrap rails in Pampanga but it was
not ready for hauling. The PNR instead
granted Lizette to withdraw scrap rails
from Tarlac instead. However, they
suspended such withdrawal in view of
internal issues regarding the Tarlsc
properties. The spouses Angeles
demanded a refund but PNR refused to
pay. On August 10, 1988, the spouses
angeles filed a suit against the PNR
against specific performance and
damages before the RTC in Quezon
City. Later, Lizette W. Angeles passed
away and was substituted by her heirs.
The RTC dismissed the case since the
spouses Angeles were not real parties-
AUGUST 25
in-interest. The Ca affirmed such
decision.
ISSUE: WON the Spouses Angeles are
real paties-in-interest in the case.
HELD: No. Lizette was not an assignee
but merely an agent whose authority
was limited to the withdrawal of the
scrap rails, hence without personality to
sue. Where agency exists, the third
party’s (PNR) liability on the contract is
to the principal (Romualdez) and not to
the agent (Lizette) and the relationship
of the third party to the principal is the
same as that in a contract in which there
is no agent. The words of Romualdez’s
letter to PNR was very clear.
I have authorized the bearer, Lizette r.
Wicangco-Angeles XXX to be my
lawful representative in the withdrawal
of the scrap/unserviceable rails awarded
to me.
It cannot be over emphasized that
Romualdez’s use of the active verb
“authorized” instead of “assigned”,
indicated an intent on his part to keep
ZHY
and retain his interest in the subject
matter.
The petition is denied.
Ong vs. CA (G.R NO.119858)
FACTS:
 Representing AMAGRI International
Corp. (AMAGRI), Edward Ong
applied for a letter of credit with
SOLIDBANK Corp. (Bank) to finance
the purchase of differential assemblies
from Metropole Industrial Sales and
subsequently executed the trust.
 On a later date, Ong, representing
AMAGRI, applied for another letter of
credit to finance the purchase
merchandise from Fretiphil
Corporation. The Bank approved the
application and Ong, representing
AMAGRI, executed another trust in
favor of the Bank acknowledging
receipt of the merchandise.
 When the trust receipts became due
and demandable, ARMAGRI failed to
16
AGENCY & PARTNERSHIP
pay or deliver the goods to the Bank
despite several demand letters.
ISSUE
 Whether Ong is liable for the default
of ARMAGRI as its agent.
HELD
 Yes. The Informations expressly state
that ARMAGRI, represented by Ong,
received the goods in trust for the
Bank under the express obligation to
remit the proceeds of the sale or to
return the goods upon demand by the
Bank. Under the Trust Receipts Law, it
is sufficient to allege and establish the
failure of ARMAGRI, whom Ong
represented, to remit the proceeds or to
return the goods to the Bank.
 When Ong signed the trust receipts, he
claimed he was representing
ARMAGRI. The corporation
obviously acts only through its human
agents and it is the conduct of such
agents which the law must deter. The
existence of the corporate entity does
not shield from prosecution the agent
who knowingly and intentionally
commits a crime at the instance of a
corporation.
AUGUST 25
9.) Explain integration and
extension as effects of the
contract of agency.
Integration- Personality of the principal is
merged with that of the agent.
3. Notice to agent is notice to principal.
Extension- Personality of the principal is
reproduced in the persons of his agent
1. Authority to act.
 By legal fiction, the agent becomes
the principal, authorized to perform
all acts which the latter would have
him do. (Orient Air Services v. CA)
 The actual or real absence of the
principal is converted into his legal
or juridical presence. (Eurotech vs.
Cuison)
 The principal becomes liable for
obligations contracted by the agent
provided that the act is within the
authority of the agent. (Prudential
Bank vs. CA)
2. Agent not real party-in-interest
 Since the agent is a mere
extension of the personality of the
principal, he is not a party to the
contract with the third person. The
liability of the third party is to the
principal and not to the agent.
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 This rule does not apply in criminal
cases. (Ong vs. CA) If the agent is
being sued in a criminal action, this
cannot be used as a defense.
Otherwise, the agent can commit any
crime and not be held liable for it.
 General rule: information relayed to
the agent in connection with the
object of the contract is deemed to
have been relayed to the principal.
(this is known as the theory of
imputed knowledge)
 However, the rule does not apply
conversely. Notice to the principal
is not notice to the agent. (Sunace
Int’l vs. CA)
 Exception to the rule: where the
conduct and dealings of the agent re
such as to raise a clear presumption
that he will not communicate to the
principal the facts in controversy.
(Cosmic Lumber vs. CA)
o This is because if the agent
were committing fraud, it
would be contrary to common
sense to presume that he would
communicate the facts to the
principal. When an agent is
engaged in the perpetration of
fraud upon his principal for his
own exclusive benefit, he is not
17
AGENCY & PARTNERSHIP
really acting for the principal
but is really acting for himself.
4. Bad faith of the agent is bad faith of
the principal.
10.) IS NOTICE TO AGENT, A NOTICE
TO PRINCIPAL?
Yes. Notice to the agent is a notice to the
principal.
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.
In Air France vs. Court of Appeals,
employing the principle that knowledge of the
agent is chargeable as knowledge of the
principal, the Court held that an airline
company cannot be held liable for breach of
contract when it dishonoured the tickets given
to the spouses, whose travel arrangement were
handled by their travel agent, since the
evidence showed that their travel agent was
duly informed by the airline company’s proper
AUGUST 25
officers that the tickets in question could not
be extended beyond the period of their validity
without paying the fare rate and travel taxes.
The Court held that “To all legal
intents and purposes, Teresita was the agent
of the GANAS and notice to her of the
rejection of the request for extension of the
validity of the tickets was notice to the
GANAS, her principals.”
11.) Is bad faith of the agent, a bad
faith of the principal?
YES- Bad faith of agent imputable to principal
(Caram vs. Laureta)
Where the principal’s acts contributed to
deceive a third person in good faith.
NO- if principal had no notice, and even
expressly forbade it, the principal is not liable.
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.
12.) Distinguished General Agency
from Agency couched in general
terms.
Article 1876, Civil Code: General agency
comprises all the business of the principal.
ZHY
Article 1877, CC: An Agency couched in
general terms comprises only acts of
administration, even if the principal should
state that she withholds no power or that the
agent may execute such acts as he may
consider appropriate, or eventhough the
agency should authorize a general and
unlimited management.
13.) Distinguish general agency from
agency couched in specific terms.
a) What are the covered transactions?
b) What is/are the effect/s of absence of
specific authorization?
Effect of absence of specific authorization
- in the absence of a grant of special power of
attorney to the agent, he is deemed to have been
extended only a general power of attorney by the
principal who only grants authority to perform acts
of administration
c) What is/are the effect/s of specific
authorization?
18
AGENCY & PARTNERSHIP
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.
14.) Who has the obligation to
determine existence and scope of
agency?
 At any rate, even if such affidavit is to
be given any probative value, the
existence of the agency relationship
cannot be established on its sole basis.
The declarations of the agent alone are
generally insufficient to establish the
fact or extent of his authority.[18] In
addition, as between the negative
allegation of respondents Canilao and
Tagunicar that neither is an agent nor
principal of the other, and the
affirmative allegation of petitioners
that an agency relationship exists, it is
the latter who have the burden of
evidence to prove their allegation,
failing in which, their claim must
necessarily fail. (Yu Eng Cho v. Pan
American, 328 SCRA 717 (2000))
 And not only must the person dealing
with the agent ascertain the existence
of the conditions, but he must also, as
AUGUST 25
in other cases, be able to trace the
source of his reliance to some word or
act of the principal himself if the latter
is to be held responsible. As has often
been pointed out, the agent alone
cannot enlarge or extend his authority
by his own acts or statements, nor can
he alone remove limitations or waive
conditions imposed by his principal.
To charge the principal in such a case,
the principal's consent or concurrence
must be shown. (Mechem on Agency,
vol. I, section 757.)
KEELER ELECTRIC CO. VS.
RODRIGUEZ (44 PHIL. 19)
Matthews electric plant, buyer did not deliver
the payment after the inspection and
installation of a certain Cenar.
Facts: Keeler sells Matthews electric plant.
AC Montelibano approached Keeler at Manila
office, claiming that he was from Iloilo and
that he could find purchases for the Matthews
plant. Keeler promised a 10% commission for
every sale consummated.
Montelibano convinced Rodriguez to buy, and
the plant was shipped from Manila to Iloilo
and later installed in the buyer’s premises.
Without Keeler’s knowledge, Rodriquez paid
the purchase price to Montelibano
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(P2,513.55). Keeler filed an action for specific
performance in CFI Manila. Lower court ruled
for Rodriguez, stating that the payment to
Montelibano discharged the debt of the
defendant.
According to Keller, at the time of the
shipment, the company sent Juan Cenar, one
of its employees, with the shipment for the
purposes of installing the plant on the
defendant’s premises and to give the statement
of account to Rodrizuez totaling P2,563.95.
According to Cenar, Rodriquez kept the
statement of account while the former made
no efforts to collect from the latter because
Rodriquez said that he would pay for the plant
in Manila.
Keeler alleges that Montelibano has no
authority from the company to receive or
receipt for money, and that his services were
confined to the finding of purchases for the
Matthews plant.
Rodriquez however alleges that it was
Montelibano himself sold and delivered the
plant to him, and was the one who ordered the
installation of the electric plant. Rodriguez
presented a statement and receipt which
Montelibano signed.
Issue: WON Montelibano had authority to
accept payment. NO
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AGENCY & PARTNERSHIP
Held:
1. There is nothing on the receipt which
showed that Montelibano was the
agent of the plaintiff. It was his own
personal receipt and his signature.
2. Payments for fare negated the
allegation of defendant that
Montelibano was the one who installed
the electric plant. (Cenar was the one
who travelled)
3. After Cenar’s return to Manila, Keller
wrote a letter to Rodriguez requesting
payment, and the latter responded with
a telegram (paid to Montelibano 3wks
Keeler did not present bill). The
telegram was in direct conflict with the
receipt Montelibano issued, which was
an itemized statement of account. As
mentioned, there was no evidence that
Montelibano was authorized to receive
payment for Keeler.
A1162 CC: Payment must be made to the
person in whose favor the obligation is
constituted, or to another authorized to receive
it in his name.
A1727: The principal shall be liable as to
matters with respect to which the agent has
exceeded his authority only when he ratifies
the same expressly or by implication.
AUGUST 25
Mechem on Agency Sec.743
Fundamental principles:
1. The law indulges no bare
presumptions that an agency exists. It
must be proved or presumed from
facts
2. The agent cannot establish his own
authority either by his representations
or by assuming to exercise it
3. An authority cannot be established
by mere rumor or general
reputation
4. Even general authority is not an
unlimited one
5. Every authority must find its
ultimate source in some act or
omission of the principal
Persons dealing with an assumed
agency, whether the it be a general or special
one, 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 and in case either is controverted, the
burden of proof is upon them to establish it.
Against the agent, the third person has
the obligation to determine existence and
scope of agency. It is moreover in any case
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entirely within the power of the person dealing
with the agent to satisfy himself that the agent
has the authority he assumed to exercise, or to
decline to enter into relations with him. The
person dealing with the agent must also act
with ordinary prudence and reasonable
diligence. If, he knows or has good reason to
believe that the agent is exceeding his
authority, he cannot claim protection.
Judgment reversed.
Yu Eng Cho vs. Pan American (328
SCRA 717)
Facts: On July 10, 1976, plaintiffs bought
plane tickets from defendant Claudia
Tagunicar who represented herself to be an
agent of defendant Tourist World Services,
Inc. (TWSI). The destinations are Hongkong,
Tokyo, San Francisco, USA, for the amount of
P25,000.00.
On said date, only the passage from Manila to
Hongkong, then to Tokyo, were confirmed.
Their flight from Tokyo to San Francisco was
on request status. After calling up Canilao of
TWSI, defendant Tagunicar told plaintiffs that
their flight is now confirmed all the way.
Thereafter, she attached the confirmation
stickers on the plane tickets.
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AGENCY & PARTNERSHIP
The plaintiffs left for Hongkong and stayed
there for five days and after that they left for
Tokyo. Upon arrival in Tokyo, they called
Pan-Am for reconfirmation of their flight to
San Francisco but the said airlines informed
them that their names are not in the manifest.
The plaintiffs then bought airline tickets for
Taipei because they could not remain in Japan
for more than 72 hours and there was no
chance for the plaintiffs to obtain airline seats
to the US because Northwest Airlines was on
strike.Upon reaching Taipei, there were no
flights available for plaintiffs, thus, they were
forced to return back to Manila instead of
proceeding to the US.
Petitioners filed a complaint against private
respondents Pan-Am,TWSI, Julieta Canilao,
and Claudia Tagunicar for expenses allegedly
incurred by the former.The RTC of Manila
held the defendants jointly and severally liable
except Julieta Canilao. The CA however
rendered a decision holding Tagunicar solely
liable and absolving Pan-Am and TWSI from
any liability. Petitioners contends that TWSI
and Pan-Am should be held principally liable
for the acts of Tagunicar,because the latter is
the sub-agent of TWSI which is a duly
authorized ticketing agent of Pan-Am.
Issue: WON there is an agency relationship
between Tagunicar, TWSI, and Pan-Am.
AUGUST 25
Held: No. Petitioners stubbornly insist that
the existence of the agency relationship has
been established by the judicial admissions
allegedly made by respondents herein, to wit:
(1) the admission made by Pan Am in its
Answer that TWSI is its authorized ticket
agent; (2) the affidavit executed by Tagunicar
where she admitted that she is a duly
authorized agent of TWSI; and (3) the
admission made by Canilao that TWSI
received commissions from ticket sales made
by Tagunicar. However, respondent Tagunicar
categorically denied in open court that she is a
duly authorized agent of TWSI, and declared
that she is an independent travel agent.
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. The elements of agency are: (1) consent,
express or implied, of the parties to establish
the relationship; (2) the object is the execution
of a juridical act in relation to a third person;
(3) the agent acts as a representative and not
for himself; (4) the agent acts within the scope
of his authority. It is a settled rule that
persons dealing with an assumed agent are
bound at their peril, if they would hold the
principal liable, to ascertain not only the
fact of agency but also the nature and
extent of authority, and in case either is
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controverted, the burden of proof is upon
them to establish it.
15. ) How is agency distinguished
from other contracts/relationship?
a) Master-servant
Differences between Agent & Servant
 An Agent Is a Person Who
Represents His Principal in Dealing
With Third Persons.
 A Servant Is a Person Who Acts for
His Master in a Ministerial Capacity.
A Servant occupies a position
which sounds parallel to that occupied
by an agent. For instance, both are
employed to act for an on behalf of the
master. Similarly, an agent and a
servant transact business (to a greater
or less extent) under the control and
supervision of their respective
employers. Yet, there is a material
difference between an agent and a
servant, which can be summed up as
follows.
Difference between an Agent &
Servant
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AGENCY & PARTNERSHIP
1) Authority to create contractual
relationship: Apart from acting on
behalf of his/her principal, an agent has
the authority to create contractual
relations between the principal and a
third party. A servant ordinarily, has
no such authority.
2) Control and Supervision: A
servant is bound to work under direct
control and supervision of his
employer. A ‘principal’ directs the
agent as to what is to be done, but a
master or employer of a servant not
only has that right, but also the right to
direct how it is to be done.
3) Number of Masters: A servant
usually serves only one master, but an
agent may work for several principals
at the same time.
4) Remuneration: The mode of
remuneration is usually different.
Remuneration for a servant is paid by
way of salary or wages, whereas an
agent generally gets his remuneration
in terms of commission calculated on
the basis of the amount of business
transacted.
5) Duty Assignment: A servant in
certain cases to some extent may be
assigned the duties of an agent, and
may act as one. For example, the
secretary of a company is regarded as
AUGUST 25
the servant of the company, but in
respect of the matters that come under
his/her domain he/she becomes an
agent in their dealings with third
persons. An agent as such never
occupies the position of a servant
because whenever he acts, he acts on
behalf of his principal and binds
him/her (principal) to third parties.
6) Liability: A principal is liable
on contracts made by his agent within
scope of authority. But a master is
answerable for any wrongful act of his
servant if it is committed in the course
of the servant’s employment.
b) Employer-employee
Unlike an agency relationship which is
essentially contractual in nature, an
employment contract under Article 1700 of
the New Civil Code is the relationship
between capital and labor which are not
merely contractual.
The purpose of an employer-employee
relationship is for the employee to render
service for the direct benefit of the employer
or of the business of the employer; while
agency relationship is entered into to enter into
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juridical relationship on behalf of the principal
with third parties. There is, therefore, no
element of “representation” in a contract of
employment, since the employee does not
have the power to enter into juridical relations
on behalf of employer.
c) Lease of service
The distinctions are the following:
1.) In agency, the basis is representation, while
in lease of service, it is employment;
2.) In agency, the agent exercises discretionary
powers, while in lease of service, the lessor
ordinarily performs only ministerial functions.
3.) In agency, three persons are involved: the
principal, the agent, and the third person with
whom the agent has contracted, while in lease
of service, only two persons are involved: the
lessor and the lessee.
4.) Agency relates to commercial or business
transactions, while lease of service relates
more to matters of mere manual or mechanical
execution, in which the servant acts under the
direction and control of the master.
d) Independent contractor
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AGENCY & PARTNERSHIP AUGUST 25 ZHY
Independent Contractor- A person who Agency to Sell Sale 1. no meeting of the minds
contracts to do work for another person Agent receives the Buyer receives the 2. taking charge of another’s
according to his or her own processes and goods as the goods of goods as owner business or property
the principal
methods. 3. the property or business must
Agent delivers the Buyer pays the price
proceeds of the sale have been abandoned or neglected
Distinction: In Independent Contractor, the (otherwise, the rules on
Agent can return the Generally, buyer
contractor is not subject to another’s control unauthorized contracts would
object in case he is cannot return the
except for what is specified in mutually unable to sell it to a 3rd
object sold apply)
binding agreement for a specific job, with person 4. the officious manager must not
regards to Agency, the agent agrees to act Agent in dealing with Buyer can deal with
have been expressly or implicitly
under the control or direction of another –the the thing received is the thing as he
bound to act according pleases, being the authorized (otherwise the rules on
principal. agency will apply)
to the instructions of owner
Control is one factor which most clearly his principal 5. the officious manager must
distinguishes agency from other legal have voluntarily taken charge.
concepts.  Diligence Required of Officious
Manager [2145]
e) Trust 1. The officious manager shall
The essential distinctions perform his duties with all the
between trust and an agency are found diligence of a good father of a
ordinarily in the fact that in trust, the family.
title and control of the property under 2. He shall pay the damages
the trust instrument passes to the which through his fault or
trustee who acts in his own name, g) Partnership negligence may be suffered by the
while the agent represents and acts for owner of the property or business
While an agent acts only for his principal, a
his principal and in the further fact that under management. The courts
partner acts not only for his co-partners and
while a trust may ordinarily be may, however, increase or
the partnership but also as principal of
terminated only by the fulfilment of its moderate the indemnity according
himself. (Arts. 1767, 1803)
purpose, an agency may in general be to the circumstances of each case.
revoked at any time.
f) Sale h) Negotiorum gestio/ quasi contract
 Agency v Negotiorum Gestio
Agency vs Sale
 Essential Requisites [2144]

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AGENCY & PARTNERSHIP
1.Consent: In agency, there is a
contract caused by a meeting of the
minds, expressly or impliedly;
Negotiorum Gestio is a quasi-
contract, there having been no
meeting of the minds.
2.Control: Agent is controlled by the
principal; the officious manager
follows his judgment and the
presumed will of the owner
i) Judicial administration
The provision of law on agency
should not apply to a judicial
administration.
A judicial administrator is appointed
by the court. He is not only the
representative of the said court, but
also the heirs and creditors of the
estate. A judicial administrator, before
entering into his duties, is required to
file a bond. These circumstances re not
true in agency. the agent is only
answerable to his principal. The
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 a judicial administrator are
subject to specific provisions of law
and orders of the appointing court.
AUGUST 25
j) Brokerage
A commission agent is one
engaged in the purchase or sale for
another of personal property which for
this purpose, is placed in his
possession and at his disposal. He
maintains a relation not only with his
principal and the purchaser or vendor,
but also with the property which is the
subject matter of the transaction.
On the other hand, a broker has no
relation with the thing he buys or sells.
He is merely an intermediary or
negotiator between the purchaser and
the vendor relative to the property with
the custody or possession of which he
has no concern. His only office is to
bring together the parties to the
transaction never acting in his own
name but in the name of those who
employed him.in effecting a
transaction, he, however, acts in a
certain sense as the agent of both
parties.
k) Guardianship
The distinctions are:
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 While the agent derives his authority
from his principal, the guardian,
although he acts for and on behalf of
his ward, does not derive his authority
so to act from the ward.
 The relation of principal and agent is
founded upon consent of the parties
thereto, while that of guardian and
ward may be created irrespective of the
consent or capacity of the ward.
 Agents are subject to the control of
their principals, while guardians are
not subject to the direction of their
wards;
 A legal guardian is substituted by law,
while ordinarily an agent is the
appointee of the principal and his
power may at any time be abrogated or
modified by the principal; and
 While an agent represents one who has
capacity to contract for himself where
he present, a guardian represents one
who has no such capacity.
l) Loan
Whether in a particular case the relation
between the parties is one of lender and
borrower or principal or agent depends on
the terms of the contract between them and
their intention.
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AGENCY & PARTNERSHIP AUGUST 25 ZHY
 Where money advanced to another is  Where one deposits money with a bank
expressly regarded as money lent, no with instructions to apply it in
agency results. One who borrows satisfaction of the debt of a third
money to conduct a business in which person, the conventional “debtor and
the lender has no interest or concern in creditor relationship” between the bank
the manner of its conduct is not an and the depositor is created, coupled
agent of the lender, but the financing with an “agency” on the part of the
of the operations to be carried on by bank to pay the debt, which is
another for the mutual advantage of revocable at the will of the depositor.
both, without any obligation of such
other to return the money advanced,
makes such other an agent rather than a
borrower.
 An agent may be given funds by the
principal to advance the latter’s
business, while a borrower is given
money for purposes of his own and he
must generally return it whether or not
his business is successful. A lot,
however, depends on the intent of the
parties.
 Where checks are deposited with a
collecting bank, the nature of the
relationship created at that stage is one
of agency, that is, the bank is to collect
from the drawees of the checks the
corresponding proceeds. After the
checks are collected and converted into
cash, the creditor and debtor
relationship is created between the
depositor and the bank.

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