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. (Art. 1868)

AGENCY – relationship which implies a power in an agent to contract with a third person on behalf of a principal.

CHARACTERISTICS OF A CONTRACT OF AGENCY Consensual -- perfected by mere consent Principal – can stand by itself without the need of another

contract Nominate – it has its own name Unilateral if it is gratuitous because it creates obligations for

only one of the parties, or bilateral if it is for compensation because it gives rise to reciprocal rights and obligations

Preparatory – it is entered into as a means to an end ESSENTIAL ELEMENTS OF AGENCY

There is consent, express or implied, of the parties to establish relationship.

The object is execution of juridical act in relation to third persons.

The agent acts as representative and not for himself. The agent acts within the scope of his authority.

The relationship of an agent to his principal is fiduciary in character since it is based on trust and confidence.

PARTIES OF THE CONTRACT Principal – one whom the agent represents and from whom he

derives his authority (any person who is capacitated to act in his own right may be a principal)

Agent – one who acts for and represents another (persons who are absolutely incapacitated, such as insane person cannot be agents; he must be competent to bind himself)

ACTS THAT CANNOT BE DONE THRU AN AGENT Personal acts – if personal performance is required by law or

public policy or the agreement of the parties, the doing of the act by a person on behalf of another does not constitute performance of the latter.

Criminal acts or acts not allowed by law – an attempt to delegate to another authority to do an act which, if done by the principal would be illegal, is VOID.

AGENCY DISTINGUISHED FROM SIMMILAR CONTRACTS

Loan Lease of Service Independent Contract Partnership Negotiorium gestio Brokerage

Similar contracts

borrower is given money for purposes of his own and he must generally return it

the basis is employment

the independent contractor exercises his employment independently

co-partners acts not only for his co-partners and the partnership but also as principal of himself

not only without the authority of the owner of the business but is without his knowledge; quasi-contract

broker has no relation with the thing he buys or sells

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agent may be given fund to advance the principal's business

the basis is representation

agent is subject to the control and direction of the principal whom he represents

agent acts for his principal

representation is expressly conferred; contract

commission agent is one engaged in the purchase or sale for another

KINDS OF AGENCY As to manner of its creation

× Express – agent has been actually authorized by the principal either orally or in writing

× Implied – implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency

As to its character× Gratuitous – agent receives no compensation for his

services× Compensated or Onerous – agent receives

compensation for his services As to extent of business covered

× General – comprises all the business of the principal× Special – comprises one or more specific transactions

As to authority conferred× Couched in general terms – created in general terms and

is deemed to comprise only acts of administration.

× Couched in specific terms – authorizing only the performance of a specific act or acts.

As to its nature and effects× Ostensible or representative – agent acts in the name

and the representation of the principal× Simple or commission – agent acts for the account of the

principal but in his own name. Acceptance by the agent may also be express or implied from his

acts which carry out the agency, or from his silence or inaction according to the circumstances. (Art. 1870)

The agency is impliedly accepted if the agent receives a power of attorney from the principal himself personally without any objection, both being present.

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.

If both the principal and the agent are absent, acceptance by the agent is not implied from his silence or inaction except when the

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principal transmits his power of attorney to the agent, who receives it without any objection, or when the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram.

TWO WAYS OF GIVING NOTICE OF AGENCY WITH DIFFERENT EFFECTS If by special information, the person pointed as agent is

considered such with respect to the person to whom it was given.

If by public advertisement, the agent is considered as such with regard to any person.

The power of attorney must be revoked in the same manner in which it was given.

When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (Art. 1874)

Agency is presumed to be for a compensation, unless there is a proof to the contrary. (Art. 1875)

CLASSIFICATION OF AGENTS Universal agent – authorized to do all acts that the principal

may personally do, and which he can delegate to another the power of doing.

General agent – authorized to transact all business of his principal, to do all acts connected with a particular trade, business or employment.

Special or particular agent – authorized to act in one or more specific transactions or to act upon a particular occasion.

An agency couched in general terms may be a general agency or special agency.

WHEN SPECIAL POWERS OF ATTORNEY ARE NECESSARY (Art. 1878) To make payment. (Payment is the delivery of money or the

performance in any other manner of an obligation) To effect novations which put an end to obligations already in

existence at the time the agency is constituted. 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.

To waive an obligation gratuitously. To convey or acquire immovable. To make gifts. To loan or borrow money. To lease realty to another for more than one year. To bind the principal to render service gratuitously. To bind the principal in a contract of partnership. To obligate the principal as a guarantor or surety. To create or convey real rights over immovable property

belonging to his principal. To accept or repudiate inheritance. To ratify obligations contracted before the agency. Any other act of strict dominion.

A special power to sell excludes the power to mortgage; and a special power to mortgage excludes the power to sell (Art. 1879)

A special power to compromise does not authorize submission to arbitration (Art. 1880)

Authority of an agent – power of the agent to affect the legal relations of the principals by acts done in accordance with the principal’s manifestation of consent to him.

KINDS OF AUTHORITY Actual – actually granted and it may be express or implied Express – conferred by words Implied – incidental to the transaction or reasonably necessary

to accomplish the purpose of the agency Apparent or ostensible – conferred by conduct or even by

silence. General – refers to all the business of the principal Special – limited to only one or more specific transactions Authority by necessity – demanded by the virtue of the

existence of emergency. WHEN PRINCIPAL BOUND BY ACT OF AGENT

Requisites× The agent must act within the scope of his authority.× The agent must act in behalf of the principal.

Ratification by the principal× If the agent acts without authority or in excess or beyond

the scope of his authority, such shall be unenforceable, unless it is ratified by the person on whose behalf it has been executed, before it is revoked by the other contracting party.

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. (Art. 1882)

WHEN PRINCIPAL BOUND BY ACTS OF AGENT BEYOND HIS POWERS When principal’s acts have contributed to deceive a third

person in good faith. When the limitations upon the power created by him could not

have been known by the third person. When the principal has placed in the hands of the agent

instruments signed by him in blank. When the principal has ratified the acts of the agent.

KINDS OF PRINCIPAL Disclosed principal – other party has notice that the agent is

acting for principal and of the principal’s identity. Partially disclosed principal – other party has notice that the

agent is or may be acting for a principal but has no notice of the principal’s identity.

Undisclosed principal – other party has no notice that the agent is acting for a principal.

If an agent acts in his own name, he is the one directly liable to the person with whom he had contracted as if the transaction were his own.

If an agent acts in his own name and involves the things belonging to the principal, the principal is bound by the act of agent as if the contract is

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