AGENCY
may do thru another.
Chapter 1: Nature, Form & Kinds of 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.
Characteristics of a contract of agency:
 Consensual
 Principal
 Nominate
 Unilateral
 Preparatory
Essential elements of agency:
 Consent, express or implied, of the
parties to establish the relationship
 Object is the execution of a juridical act
in relation to third persons
 Agent acts as a representative and not
for himself
 Agent acts within the scope of his
authority
Parties to the contract:
 Principal
 Agent (representative manner/relation)
Capacity to act:
 Any person who is capacitated to act in
his own may be a principal
 Since he assumes no personal liability,
he does not have to possess full
capacity to act insofar as third persons
are concerned. (Agent)
Acts that may be delegated to agents:
General rule – what a man may do in person, he
Exceptions:
 Personal acts (e.g. right to vote, making
of will, statements required be made
under oath)
 Criminal acts or acts not allowed by law
Agency distinguished from similar contracts:
 Loan –a borrower is given money for
purposes of his own and must return it
whether or not his own business is
successful
 Lease of service – employment; the
lessor (like a servant) ordinarily
performs only ministerial functions
 Independent contract – where one
party to a contract undertakes to
accomplish a certain result according to
his own methods and without being
subject to the other party’s control
except as to the result of the work, the
contract is one for a piece of work
 Partnership – a partner acts not only for
his co-partners and the partnership but
also as principal of himself
 Negotiorium gestio – management of
the business or affairs of an absentee;
representation is not only without the
authority of the owner but is without
his knowledge. (gestor acts according to
the presumed will of the owner by
exercising “all the diligence of a good
father of a family)(quasi-contract)
 Brokerage – broker has no relation with
the thing he buys or sells; merely an
intermediary between the purchaser
and the vendor
 Sale – Article 1466
Article 1869 – Kinds and Forms of agency
Kinds of agency:
1. As to manner of its creation
 Express
 Implied (acts of principal,
principal’s silence or lack of
action, or failure to repudiate
agency)
2. As to its character
 Gratuitous
 Compensated or Onerous
3. As to extent of business covered
 General
 Special
4. As to authority conferred
 Couched in general terms
 Couched in specific terms
5. As to its nature and effect
 Ostensible or Representative
 Simple or Commission
Form of agency:
 Written or oral; unless the law requires
a specific form
Article 1870 – Acceptance by agent may be
express or implied from his acts which carry
out the agency or his silence or inaction
according to the circumstances
Article 1871 –Where persons are present,
acceptance of agency may be implied if
principal delivers power of attorney and the
latter receives it without any objection
Power of attorney – “written authorization to
an agent to perform specified acts in behalf of
his principal which acts, when performed, shall
have binding effect on the principal”
Article 1872 – Where persons are absent,
acceptance cannot be implied, except:
1. Principal transmits his power of
attorney to agent, who receives it
without any objection
2. 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
Article 1873 – If person especially informs of
state by public advertisement that he has
given a power of attorney to a third person, he
becomes duly authorized agent. The power
shall continue to be in full force until notice is
rescinded in the same manner given.
Article 1874 – Sale of a piece of land or any
interest through an agent must be in writing,
otherwise void.
Article 1875 – Agency is presumed to be for a
compensation, unless there is proof to the
contrary.
Article 1876 – An agency is either general or
special
Classifications of agents:
1. Universal agent – one authorized to do
all acts that the principal may
personally do, and which he can
lawfully delegate to another the power
of doing so
2. General agent – one authorized to
transact all the business of his principal,
or all business of a particular kind or in
a particular place.
3. Special/particular agent – one
authorized to act in one or more
 specific transactions or to act upon a
particular occasion.
Article 1877 – An agency couched in general
terms comprises only acts of administration,
even if principal withholds no power, agent
may execute such acts as he may consider
appropriate, or principal authorizes a general
or unlimited management
Acts or administration – those which do not
imply the authority to alienate for the exercise
of which an express power is necessary
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;
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.
Article 1879 – A special power to sell excludes
the power to mortgage, vice versa
Article 1880 – A special power to compromise
does not authorize submission to arbitration
Article 1881 – The agent must act within the
scope of his authority. He may do such acts as
may be conducive to the accomplishment of
the purpose of the agency.
Article 1882 – The limits of the agent's
authority shall not be considered exceeded
should it have been performed in a manner
more advantageous to the principal than that
specified by him.
Authority of an agent – power of the agent to
affect the legal relations of the principal by acts
done in accordance with the principal’s
manifestation of consent to him
Authority vs. Power
 As to existence – authority ; cause :
power ; effect
 As between an agent and a principal –
authority ; not a violation of his duty :
 power ; he has legal ability to bind
principal
 So far as third persons are concerned –
no distinction exists
Kinds of authority:
 Actual
 Express
 Implied
 Apparent or ostensible
 General
 Special
 Authority by necessity
Requisites for principal to be bound to third
persons by the act of agent:
1. Agent must act within the scope of his
authority
2. Agent must act on behalf of the
principal (ratification)
*performance of agency more advantageous to
principal – agent not deemed to have exceeded
his authority
Qualifications for principal to be bound by acts
of agent beyond his power:
1. Where his acts have contributed to
deceive a third person in good faith (P)
2. Where the limitations upon the power
created by him could not have been
known by the third person
3. Where the principal has placed in the
hands of the agent instruments signed
by him in blank
4. Where the principal has ratified the acts
of the agent
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.
Kinds of principal:
1. Disclosed principal – if at the time of
transaction, the other party has notice
that the agent is acting for a principal
and of the principal’s identity
2. Partially disclosed principal – if other
party has notice that agent is or may be
acting for a principal but has no notice
of principal’s identity
3. Undisclosed principal – if the other part
has no notice that the agent is acting
for a principal
Chapter 2: Obligations of the Agent
Article 1884 –Agent is bound by his acceptance
to carry out the agency, and is liable for the
damages which, through his non-performance,
the principal suffer.
He must also finish the business already begun
on the death of the principal, should delay
entail any danger.
Specific obligations of the agent:
1. Carry out the agency in accordance with
its terms
2. Answer for the damages which through
his non-performance the principal may
suffer
3. Finish the business already begun on
the death of the principal, should delay
entail any danger
4. Observe the diligence of a good father
of a family in the custody and
preservation of the goods forwarded to
him by the owner in case he declines an
agency, until an agent is appointed
5. Advance the necessary funds should
there be a stipulation
6. Act in accordance with the instructions
of the principal
7. Not to carry out the agency if its
execution would manifestly result in
loss or damage to the principal
8. Answer for damages should he prefer in
case of conflict, his own interests to
those of the principal
9. Not to loan to himself without the
consent of the principal when he has
been authorized to lend at interest
10. Render an account of his transactions
and deliver to the principal whatever he
may have received by virtue of the
agency
11. Distinguish goods by countermarks and
designate the merchandise respectively
belonging to each principal, in the case
of a commission agent who handles
goods of the same kind and mark,
which belong to different owners
12. Be responsible in certain cases for the
acts of the substitute appointed by him
13. Pay interest on funds he has applied to
his own use
14. Inform the principal, where an
authorized sale of credit has been
made, of such sale
15. Bear the risk of collection, should he
receive also on the sale, a guarantee
commission
16. Indemnify the principal for damages for
his failure to collect the credits of his
principal at the time that they become
due
17. Answer for his fraud or negligence
Article 1885 – Person declines an agency,
observe the diligence of a good father of a
family to goods forwarded until an agent is
appoint. Owner as soon as practicable appoint
an agent or take charge of goods.
Article 1886 – Stipulation to advance necessary
funds, except when principal is insolvent.
Article 1887 – Agent acts in accordance with
instruction. He shall do all that a good father of
a family would do, as required by the nature of
business (in the absence of instruction).
Authority – extent or limitation of the agent’s
power to represent the principal
Instructions – directions which the principal
may give the agent to follow in the discharge of
his duties as such agent
Article 1888 – Agent not carry out if it would
result in loss or damage to the principal
Article 1889 – Agent liable for damages if he
prefers his own interest
Article 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.
Article 1891 – Agent bound to render an
account of his transaction and deliver
whatever he may have received, even though
it may not be owing to the principal.
Stipulation exempting to render an account
shall be void.
Article 1892 – Agent may appoint a substitute
if principal has not prohibited him from doing
so; but shall be responsible for the acts of
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.
Article 1893 – Principal may furthermore bring
an action against the substitute with respect to
the obligations which the latter has contracted
under the substitution.
Subagent – a person to whom the agent
delegates as his agent, the performance of an
act for the principal which the agent has been
empowered to perform through his
representative
Article 1894 – Responsibility of two or more
agents is not solidary, if solidarity not been
expressly stipulated.
Article 1895 – If solidarity has been agreed,
each agent is responsible for the non-
fulfillment of the agency, and for the fault or
negligence of his fellow agent, except in the
latter case when the fellow agents acted
beyond the scope of his authority
Article 1896 – Agents 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 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.
Article 1898 – If agent contract in the name of
the principal, exceeding the scope of authority
and principal does not ratify the contract, it
shall be void if the party contracted is aware of
the limits of powers. Agent is liable if he
undertook to secure the principal’s ratification.
Article 1899 – Duly authorized agent acts in
accordance with the orders of principal, the
latter cannot set up the ignorance of the
agent.
Article 1900 – So far as third persons are
concerned, an act is deemed to have been
performed within the scope of the agent's
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.
Article 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.
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.
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.
Factor/commission agent – one whose business
is to receive and sell goods for a commission
and who is entrusted by the principal with the
possession of goods to be sold
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.
Guarantee commission – one where in
consideration of an increased commission the
factor or commission agent guarantees to the
principal the payments of debts arising through
his agency. (del credere commission)
Del credere agent – agent who receives a
guarantee commission
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.
Article 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.
Chapter 3: Obligations of 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.
Specific obligations of the principal:
1. Comply with all the obligations which
the agent may have contracted within
the scope of his authority and in the
name of the principal
 2. Advance to the agent, should the latter
so request, the sums necessary for the
execution of the agency
3. Reimburse the agent for all advances
made by him provided the agent is free
from fault
4. 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
5. Pay the agent the compensation agreed
upon, or if no compensation was
specified, the reasonable value of the
agent’s services
Article 1911 – Principal is solidarily liable with
the agent if the former allowed to act as
though he had full powers, even if exceeded
authority.
Estoppel – bar which precludes a person from
denying or asserting anything contrary to that
which has been established as the truth by his
own deed or representation either express or
implied.
*protection of third persons & agent exempt
from liability if acted in good faith
Apparent authority – that which though not
actually granted, the principal knowingly
permits the agent to exercise or holds him out
as possessing
Authority by estoppel – arises in cases where
the principal by his culpable negligence permits
his agent to exercise powers not granted to
him, even though the principal may have no
notice or knowledge of the conduct of the
agent
Implied agency vs. Agency by estoppel
Implied agency – actual agency; principal alone
is liable
Agency by estoppel – authority of the agent is
not real but only apparent if:
 Estoppel is caused by the principal, he
is liable to any third person who relied
on the misrepresentation
 Estoppel is caused by the agent, then
only the agent is liable
Article 1912 – Principal must advance or
reimburse the sums necessary for the
execution of the agency, which includes
interest from the day on which the advance
was made.
Article 1913 – Principal must indemnify
damages from execution, without fault or
negligence on agent.
Article 1914 – Agent may retain in pledge
objects of the agency until the principal effects
the reimbursement and pays the indemnity set
forth in the two preceding articles.
Article 1915 – If two or more persons have
appointed an agent for a common transaction
or undertaking, principals are solidarily liable
to agent for all consequences.
Article 1916 – When two persons contract with
regard to the same thing (principal and agent),
and two contracts are incompatible with each
other, that of prior date shall be preferred,
without prejudice to the provisions of Article
1544.
Article 1917 – If agent acted in good faith,
principal is liable for damages to the third
person (for 1916)
Article 1918 – Principal is not liable for
expenses incurred by the agent in the
following cases:
1. If 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
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.
Chapter 4: Modes of Extinguishment of Agency
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
*terminated by agreement (5,6), operation of
law (3,4), and subsequent acts of the parties
which may be either by mutual consent or by
unilateral acts (1,2)
Civil interdiction – a form of disqualification
which deprives the offender during the period
of his sentence of the right to manage his
property and dispose of such property by any
act or any conveyance inter vivos
Article 1920 – Principal may revoke the agency
at will and compel the agent to return the
document evidencing the agency (express or
implied)
Article 1921 – If 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
Article 1922 – If the agent has general powers,
revocation of 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.
Article 1923 – The appointment of new agent
for the same business or transaction revokes
the previous agency from the day on which
notice is given thereof was given to the former
agency, without prejudice to the provisions of
1921 &1922. (implied)
Article 1924 – The agency is revoked if
principal directly manages the business
entrusted to the agent, dealing directly with
third persons. (implied)
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.
Article 1926 – A general power of attorney is
revoked by a special one granted to another
agent, as regards the special matter involved in
the latter.

Article 1927 – An agency cannot be revoked if

a bilateral contract depends upon it, or if it is
the means of fulfilling an obligation already
contracted, or if a partner is appointed
manager of a partnership in the contract of
partnership and his removal from the
management is unjustifiable.

Article 1928 – Agent may withdraw from the

agency by giving due notice to the principal. If
principal suffers from damages by withdrawal,
agent must indemnify, unless the agent should
base his withdrawal upon the impossibility of
continuing the performance of the agency
without grave detriment to himself.

Article 1929 – The agent, even if he withdraws

with valid reason, must continue to act until
the principal has had reasonable opportunity
to take the necessary steps to meet the
situation.

Article 1930 – 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 death or of any other
cause of extinguishment, is valid and shall be
fully effective with respect to third persons
who may have contracted with him in good
faith.

Article 1932 – If the agent dies, his heirs must

notify the principal, and in the meantime
adopt such measures as the circumstances
may demand in the interest of the latter.