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 bilateralif it is for compensation because it gives rise to reciprocal rights and obligations Preparatory it isentered 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.

Agency5

AGENCY DISTINGUISHED FROM SIMILAR CONTRACTS

LoanLease of ServiceIndependent ContractPartnershipNegotiorium gestioBrokerage

Similar contractsborrower is given money for purposes of his own and he must generally return itthe basis is employmentthe independent contractor exercises his employment independentlyco-partners acts not only for his co-partners and the partnership but also as principal of himselfnot only without the authority of the owner of the business but is without his knowledge; quasi-contractbroker has no relation with the thing he buys or sells

Agencyagent may be given fund to advance the principal's businessthe basis is representationagent is subject to the control and direction of the principal whom he representsagent acts for his principalrepresentation is expressly conferred; contractcommission 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 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 AGENCYWITH 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 acontract 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 principals 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 oneor 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 agents 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 principals 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 principals 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 principals identity. Undisclosed principal other party has no notice thatthe 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 entered into between the principal and the third person.OBLIGATIONS OF THE AGENT1. The agent is bound by his acceptance to carry out the agency, and is liable for the damages, whichthrough his non-performance the principal may suffer. (Art. 1884)2. He must also finish the business already begun on the death of the principal, should delay entail any danger. (Art. 1884)3. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and the preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods himself. (Art.1885)4. Should there be a stipulation that the agent shall advancethe necessary funds, he shall be bound to do so except when the principal is insolvent. (Art. 1886) Rule: The principal must advance to the agent, should the latter so request, the sums necessary for the execution of agency. In case of insolvency, the principal is not liable for the expenses incurred by the agent.5. In the execution of agency, the agent shall act in accordance with the instructions (reasonable and lawful) of the principal. (Art. 1887) Authority: extent or limitation of the agents power to represent the principal; Instructions: private directions which the principal may give the agent to follow in the discharge of his duties. If the agent exceeds, violates or fails to act upon such instruction, he will be liable for any loss or damage resulting therefrom. In the absence of specific instructions, the agent shall do all that good father of the family would as required by the nature of the business If the agent acts in good faith and withdue care, the agent is not liable for losses due to errors or mistakes of judgments as regards to matters with which he is vested with discretionary powers.6. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (Art. 1888)7. The agent shall be liable for damages, if there being a conflict between his interests and those of the principal, he should prefer his own. (Art. 1889)8. If the agent is 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.9. Every agent is bound to render an account of his transactions and to deliverto the principal what he may have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation exempting the agent from the obligation to render an account shall be void.10. The agentmay appoint a substituteif the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute when (1)he was not given the power to appoint one; (2) he was given such power, but withoutdesignating 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. (Art. 1892) Subagent person to whom the agent delegates as his agent, the performance of an act for the principal where the agent has empowered to perform through his representative. Principal has a right of action not only against the agent but also against the substitute (Art. 1893) EFFECTS OF SUBSTITUTION Substitution prohibited. all acts of substitute shall be void Substitution authorized. the substitution has the effect of releasing the agent from his responsibility unless the person appointed is notoriously incompetent or insolvent. Substitution not authorized, but not prohibited. the law recognizes the validity of the substitution if the same is beneficial to the principal. If the substitution has occasioneddamage to the principal, the agent shall be primarily responsible for the acts of substitution. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. (Art. 1894) If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of the agency, and for the fault or negligence of his fellow agents, except in the latter case when the fellow agents acted beyond the scope of their authority. (Art. 1895)11. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. (Art. 1896) When agent may incur personal liability. (Art. 1897) When the agent expressly binds himself When the agent exceeds his authority Effects where third person aware of limits of agents power (Art. 1898) If the agent acts in excess of his authority, even if he contracts in the name of the principal, the agent is the one personally liable, unless there is subsequent ratification by the principal. The agent is not bound in case he gave notice of his powers to the person with whom he has contracted nor in case such person is aware of the limits of the power granted by the principal. If the agent promised to secure the principals ratification and failed, he is personally liable. If the ratification is obtained, then the principal becomes liable. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been aware. (Art. 1899) So far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent.(Art. 1900) A third person cannotset up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agents acts. (Art. 1901) A third person with whom the agent wishes to contract on behalf of the principal may requirethe presentation of the power of attorney, or instructions as regards to 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. (Art. 1902)12. The commission agent who handles goods of the same kind, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal. (Art. 1904) Factor or 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. The commission agent shall be responsible for the goods received by him in the terms and conditions as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. (Art. 1903) 13. 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 buyer.Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned. (Art. 1906) Its purpose is to prevent the agent form stating tha the sale was on credit when in fact it was made for cash. 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. (Art. 1905)14. Should the commission agent receive on a sale, in addition to 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. (Art. 1907) Guarantee commission (del credere commission) one where in consideration of an increased commission the factor or commission agent guarantees to the principal the payment of debt arising through his agency. The purpose of guarantee commission is to compensate the agent for the risk he will have to bear in the collection of the credit due to principal.15. 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 exercise due diligence for that purpose. (Art. 1908)16. 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 compensation.OBLIGATIONS OF THE PRINCIPAL1. To comply with all the obligations which the agent may have contracted within the scope of his authority and in the name of the principal. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. (Art. 1910) 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. (Art. 1911) Apparent authority vs. Authority by estoppel Apparent authority is that which though not actually granted, the principal knowingly permits the agent to exercise or holds him out of possessing. Authority by estoppelarises in those cases where the principal by his culpable negligence permits his agent to exercise power not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent.2. To advance to the agent, should the latter so request, the sums necessary for the execution of agency. (Art. 1912)3. To reimburse the agent from all advancesmade by him, even if the business or undertaking was not successful, provided the agent is free from all fault. (Ibid.) Reimbursement shall include interest on the sums advanced, from the day on which the advance was made.4. To indemnify the agent for all the damages which the execution of the agency may have caused the latter without fault of negligence to his part. (Art. 1913) If the principal fails reimburse of indemnify the agent as required in Art. 1912 & Art. 1913, the agent has a right to retain in pledge the things which are the object of the agency (Art. 1914) If two or more principals have appointed an agent for a common transaction or undertaking, the liability of the principals is solidary for all consequences of the agency; that is each principal may be sued by the agent for the entire amount due and not just for his proportionate share. (Art. 1915) When two persons contract with regard to the same thing, one of them with the agentand the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of article 1544. (Art. 1916) If the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible (Art. 1917) The principal is not liable for the expenses incurred by the agent: If the agent acted in contravention of the principals instruction, unless the latter should wish to avail himself of the benefits derived from contract. When the expenses were due to the fault of the agent. When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof. When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. (Art. 1918)5. To pay the agent compensation agreed upon, or f no compensation was specified, the reasonable value of the agents servicesMODES OF EXTINGUISHMENT OF AGENCY Agency is extinguished:1. By its revocation2. By the withdrawal of the agent3. By then death, civil interdiction, insanity, or insolvency of the principal or of the agent4. By the dissolution of the firm or corporation which entrusted or accepted the agency5. By the accomplishment of the object of the purpose of the agency6. By the expiration of the period for which the agency was constituted. (Art. 1919) Civil interdiction is a form of disqualification which deprives the offender during the period of his sentence of the right to manage his property and disposed of such property by any act or any conveyance inter vivos. The principal may revoke at will, and compel the agent to return the document (if the authority is in writing) evidencing the agency. Such revocation may be expressed or implied. (Art. 1920) While the principal may have absolute power to revoke the agency at any time, he must respond in damages in those cases wherein not having the right to do so, he should discharge the agent. Implied revocation an example is when the principal appoints a new agent for the same business or transaction (Art. 1923) or when the principal directly manages the business entrusted to the agent, dealing directly with third persons. (Art. 1924). If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (Art. 1921) If the agency had general powers, its revocation does not prejudice third persons who acted in good faith and without knowledge of revocation. Notice of the revocation in the newspaper of general circulation is a sufficient warning to third persons. (Art. 1922) The appointment of a new agentfor the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agency, without prejudice to the provisions of two preceding articles. (Art. 1923) 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. (Art. 1925) A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. (Art. 1926) 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. (Art. 1927) The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. (Art. 1928) Even when the agent withdraws from the agency for a valid reason, he must continue to act until the principal has ha had reasonable opportunity to take necessary steps. (Art. 1929) The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor (Art. 1930) Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. (Art. 1931) If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. (Art. 1932)