AGENCY

Agency
Villanueva-Tiansay, 2015)
VIII. AGENCY
7. Generally onerous
8. Representative relation – The agent acts for

Contract of agency (2000, 2003 BAR)
and on behalf of the principal on matters within
the scope of his authority and said acts have the
By the contract of agency, a person binds himself to
same legal effect as if they were personally
render some service or to do something in
executed by the principal. (Rabuya, 2017)
representation or on behalf of another, with the
consent or authority of the latter. (Art. 1868, NCC)
9. Fiduciary and Revocable – For the creation of
legal relationship of representation by the agent
NOTE: The essence of agency is representation. For
on behalf of the principal, the powers of the
a Contract of Agency to exist, it is essential that the
former are essentially derived from the latter.
principal consents that the agent shall act on the
Neither the principal nor the agent can be legally
former’s behalf and the agent consents so as to act.
made to remain in the relationship when they
(Rabuya, 2017)
choose to have it terminated.
One factor which most clearly distinguishes agency

Classifications of Agency
from other legal concepts is control; one person – the
agent – agrees to act under the control or direction of
1. As to manner of creation
another – the principal. Indeed, the very word
a. Express – Agent has been actually
“agency” has come to connote control by the
authorized by the principal, either
principal. (Amor Trading Corp. v. CA, G.R. No. 158585,
orally or in writing. (Art. 1869, NCC)
13 Dec. 2005)
b. Implied – Agency is implied from the
acts of the principal, from his silence or
lack of action, or his failure to repudiate
A. NATURE, FORM, AND KINDS the agency, knowing that another
person is acting on his behalf without
authority, (Art. 1869, NCC) or from the
Characteristics of a contract of agency acts of the agent which carry out the
agency, or from his silence or inaction
1. Bilateral – If it is for compensation, it gives rise according to the circumstances. (Art.
to reciprocal rights and obligations. 1870, NCC)
2. Unilateral – If gratuitous, it creates obligations 2. As to character

for only one of the parties. a. Gratuitous – Agent receives no
compensation for his services. (Art.
3. Nominate – It has its own name. 1875, NCC)
b. Onerous or Compensated – Agent
4. Consensual – It is perfected by mere consent. receives compensation for his services.
(Art. 1875, NCC)
5. Principal – It can stand by itself without need of
another contract.
3. As to extent of business of the principal
a. General – Agency comprises all the
6. Preparatory and Progressive – It is entered
business of the principal. (Art. 1876,
into as a means for other purposes that deal with
NCC)
the public in a particular manner: for the agent
b. Special – Agency comprises one or more
to enter into juridical acts with the public in the
specific transactions. (Art. 1876, NCC)
name of the principal. (Villanueva and
UNIVERSITY OF SANTO TOMAS 492

2022 GOLDEN NOTES
Civil Law
4. As to authority conferred 4. The agent acts within the scope of his authority.
a. Couched in general terms – Agency is (Sps. Viloria v. Continental Airlines, Inc., G.R. No.
created in general terms and is deemed 188288, 16 Jan. 2012)
to comprise only acts of administration.
(Art. 1877, NCC) Appointment of an agent
b. Couched in specific terms – Agency
authorizing only the performance of a GR: There are no formal requirements governing the
specific act or acts. (Art. 1876, NCC) appointment of an agent.
5. As to nature and effects XPN: When the law requires a specific form, i.e. when
a. Ostensible or Representative – Agent acts sale of land or any interest therein is through an
in the name and representation of the agent, the authority of the latter must be in writing;
principal. (Art. 1868, NCC) otherwise, the sale shall be void. (Art. 1874, NCC)
b. Simple or Commission – Agent acts in his (2010 BAR)
own name but for the account of the
principal. (De Leon, 2014) Rules on Implied Acceptance of agency
Parties to a contract of agency 1. Between persons who are present – The

acceptance of the agency may also be implied if
1. Principal (Mandante) – One whom the agent the principal delivers his power of attorney to
represents and from whom he derives his the agent and the latter receives it without any
authority; he is the person represented or the objection. (Art. 1871, NCC)
person who consents that another shall act on 2. Between persons who are absent – The
his behalf. acceptance of the agency cannot be implied from
the silence of the agent except:
2. Agent (Mandatario) – One who acts for and a. When the principal transmits his power
represents another; he is the person acting in a of attorney to the agent, who receives it
representative capacity. The agent has without any objection;
derivative authority in carrying out the b. When the principal entrusts to him by
principal’s business. (De Leon, 2019) letter or telegram a power of attorney
with respect to the business in which he
Essential elements of an agency is habitually engaged as an agent and he
did not reply to the letter or telegram.
1. Consent (express or implied) of the parties to (Art. 1872, NCC)
establish the relationship.
NOTE: Acceptance by the agent may also be express
NOTE: A person may express his consent: or implied from his acts which carry out the agency,
a. by contract, (Art. 1868, NCC), orally or in or from his silence or inaction according to the
writing; circumstances. (Art. 1870, NCC)
b. by conduct; (Art. 1869, NCC
c. by ratification; Art. 1910, NCC) or Communication of existence of agency
d. the consent may arise by presumption
or operation of law. (De Leon, 2014) Ways of giving notice of agency:
1. By special information – The person appointed as
2. The object is the execution of a juridical act in agent is considered such with respect to the
relation to third persons; person to whom it was given.
2. By public advertisement – The agent is
3. The agent acts as a representative and not for considered as such with regard to any person.
himself; and (Art. 1873, NCC; De Leon, 2019)
493 UNIVERSITY OF SANTO TOMAS

FACULTY OF CIVIL LAW
Agency
Nature of the relationship between principal and undertaking. (De Leon, 2019)
agent
Theory of imputed knowledge
It is fiduciary in nature that is based on trust and
confidence. The agent is estopped from asserting or The importance of the duty to give information of
acquiring an interest adverse to that of his principal. material facts becomes readily apparent when it is
(De Leon, 2019) borne in mind that knowledge of the agent is
imputed to the principal even though the agent never
Qualifications of a Principal communicated such knowledge to the principal.
(Ibid.)
1. Natural or juridical person; and
2. Must have capacity to enter into contract in his Exceptions to the theory of imputed knowledge
own right. (Ibid.)
1. The agent’s interests are adverse to those of the
NOTE: If a person is capacitated to act for himself or principal;
his own right, he can act through an agent. 2. The agent’s duty is not to disclose the
information, as where he is informed by way of
Insofar as third persons are concerned, it is enough confidential information; and
that the principal is capacitated. But insofar as his 3. The person claiming the benefit of the rule
obligations to his principal are concerned, the agent colludes with the agent to defraud the principal.
must be able to bind himself. (Ibid.)
Kinds of Principal NOTE: The theory of imputed knowledge ascribes

the knowledge of the agent to the principal, not the
1. Disclosed principal – At the time of the other way around. The knowledge of the principal
transaction contracted by the agent, the other cannot be imputed to his agent. (Sunace Intl. Mgmt.
party knows that the agent is acting for a Services, Inc. v. NLRC, G.R. No. 161757, 25 Jan. 2006)
principal and of the principal’s identity.
Kinds of agents
2. Partially disclosed principal – The other party
knows or has reason to know that the agent is or 1. Universal agent – employed to do all acts which
may be acting for a principal but is unaware of the the principal may personally do, and which he
principal’s identity. can lawfully delegate to another the power of
doing.
3. Undisclosed principal – The party has no notice of
the fact that the agent is acting as such for a 2. General agent – employed to transact all
principal. (De Leon, 2019) business of the principal, or all the business of a
particular kind or in a particular place, or in
Joint principals other words, to do all acts connected with a
particular trade, business or employment.
Two or more persons appoint an agent for a common
transaction or undertaking. (Art. 1915, NCC) 3. Special or particular agent – authorized to act in
one or more specific transactions, or to do one or
Requisites for solidary liability of joint principals more specific acts, or to act upon a particular
occasion. (De Leon, 2019)
1. There are two or more principals;
2. They have all concurred in the appointment of
the same agent; and
3. Agent is appointed for a common transaction or

2022 GOLDEN NOTES
Civil Law
Rule with regard to the execution of the agency required them to take out an insurance policy on
the vehicle. In the promissory note, the Spouses
GR: The agent is bound by his acceptance to carry out Briones constituted iBank as their attorney-in-
the agency, in accordance with the instruction of the fact with full power and authority for the
principal and is liable for damages which, through purpose of filing claims with the insurance
his non-performance, the principal may suffer. (Arts. company as may be necessary to prove the claim
1884 & 1887, NCC) and to collect from the latter the proceeds of
insurance in case of loss or damage to the
XPN: If its execution could manifestly result in loss vehicle. The mortgaged BMW Z4 Roadster was
or damage to the principal. (Art. 1888, NCC) carnapped in Tandang Sora, Quezon City.
Spouses Briones declared the loss to iBank,
Responsibility of two or more agents appointed which instructed them to continue paying the
simultaneously next three (3) monthly installments “as a sign of
good faith.” When the Spouses Briones finished
GR: They are jointly liable. (Art. 1894, NCC) paying the three (3)-month installment, iBank
sent them a letter demanding full payment of the
XPN: Solidarity has been expressly stipulated. Each lost vehicle. The Spouses Briones submitted a
of the agents becomes solidarily liable for: notice of claim with their insurance company,
1. The non-fulfillment of the agency but the latter denied the claim due to the
2. Fault or negligence of his fellow agent (Art. 1895, delayed reporting of the lost vehicle.
NCC)
Thereafter, iBank filed a complaint for the
XPNs to the XPN: default of the Spouses to pay monthly
2. When one of the other agents acts beyond the amortizations. RTC ruled that as the duly
scope of his authority – innocent agent is not constituted attorney-in-fact of the Spouses
liable. Briones, iBank had the obligation to facilitate
3. When the fault or negligence of his fellow agents the filing of the notice of claim and then to
was done beyond the scope of their authority – pursue the release of the insurance proceeds.
innocent agent is not liable. (Art. 1895, NCC) The CA also dismissed the complaint. Did an
agency relationship exist between the parties
Instances when the agent may incur personal which obligated iBank to facilitate the filing of
liability the claim against the insurance company?
1. Agent expressly bound himself; A: YES. All the elements of agency exist in this case,
2. Agent exceeded his authority; namely (1) there is consent, express or implied, of
3. Acts of the agent prevented the performance on the parties to establish the relationship of agency;
the part of the principal; (2) the object is the execution of a juridical act in
4. When a person acted as agent without authority relation to a third person; (3) the agent acts as a
or without a principal; and representative and not for himself; and (4) the agent
5. When a person acted as an agent of an acts within the scope of his authority.
incapacitated principal unless the third person
was aware of the incapacity at the time of the Under the promissory note with chattel mortgage,
making of the contract. (De Leon, 2019) Spouses Briones appointed iBank as their attorney-
in-fact, authorizing it to file a claim with the
Q: Spouses Briones took out a loan of insurance company if the mortgaged vehicle was
₱3,789,216.00 from iBank to purchase a BMW lost or damaged. iBank was also authorized to
Z4 Roadster. The monthly amortization for two collect the insurance proceeds as the beneficiary of
(2) years was ₱78,942.00. They executed a the insurance policy. Article 1370 of the Civil Code
promissory note with chattel mortgage that is categorical that when “the terms of a contract are

Agency
clear and leave no doubt upon the intention of the Rule regarding double agency
contracting parties, the literal meaning of its
stipulations shall control. (Union Bank of the GR: Disapproved by law for being against public
Philippines v. Spouses Briones, G.R. No. 205657, 29, policy and sound morality.
Mar. 2017)
XPN: Where the agent acted with full knowledge and
Presumption of contract of agency consent of the principals.
GR: Agency is not presumed. Acts that a principal may delegate to his agent
The relation between principal and agent must exist GR: What a man may do in person, he may do thru
as a fact. Thus, it is held that where the relation of another.
agency is dependent upon the acts of the parties, the
law makes no presumption of agency, and it is always XPNs:
a fact to be proved, with the burden of proof resting 1. Personal acts; and
upon the person alleging the agency to show, not 2. Criminal acts or acts not allowed by law.
only the fact of its existence, but also its nature and (Ibid.)
extent. (Victorias Milling Co., Inc. v. Consolidated
Sugar Corporation, G.R. No. 117356, 19, June 2000) Q: A granted B the exclusive right to sell his brand
of Maong pants in Isabela, the price for his
XPNs: merchandise payable within 60 days from
1. Operation of law; and delivery, and promising B a commission of 20%
2. To prevent unjust enrichment. (De Leon, on all sales. After the delivery of the merchandise
2010) to B but before he could sell any of them, B’s store
in Isabela was completely burned without his
Agency by necessity fault, together with all of A's pants. Must B pay A
for the lost pants? Why? (1999 BAR)
Agency cannot be created by necessity. What is
created instead is additional authority in an agent A: YES. B must pay A for the lost pants. The contract
appointed and authorized before the emergency between A and B is a sale not an agency to sell
arose. By virtue of the existence of an emergency, the because the price is payable by B upon 60 days from
authority of an agent is correspondingly enlarged in delivery even if B is unable to resell it. If B were an
order to cope with the exigencies or the necessities agent, he is not bound to pay the price if he is unable
of the moment. (De Leon, 2019) to resell it. As a buyer, however, ownership passed to
B upon delivery and, under Art. 1504, the thing
Requisites for the additional authority of agent in perishes for the owner. Hence, B must still pay the
cases of necessity price.
1. Real existence of emergency; Proving the existence of principal-agent

2. Inability of the agent to communicate with the relationship through mere representation
principal;
3. Exercise of additional authority is for the Mere representation of an alleged agent is not
principal’s protection; and sufficient to prove the existence of a principal-agent
4. Adoption of fairly reasonable means, premises relationship. The declarations of the agent alone are
duly considered. (Ibid.) generally insufficient to establish the fact or extent of
agency. It is a settled rule that the persons dealing
with the assumed agent are bound at their peril, if
they would hold the principals liable, to ascertain not
only the fact of agency but also the nature and extent

2022 GOLDEN NOTES
Civil Law
of authority, and in case either is controverted, the Agency v. Judicial Administration

burden of proof is upon them to establish it. (Sps. Yu
v. Pan American World Airways, Inc., G.R. No. 123560,
JUDICIAL
27 Mar. 2000) AGENCY
ADMINISTRATION
Agency v. Guardianship As to the source of authority
Judicial administrator
AGENCY GUARDIANSHIP Agent is appointed
is appointed by the
by the principal
As to who they represent court
Guardian represents As to whom they represent

Agent represents a
an incapacitated Represents not only
capacitated person.
person. Represents the the court but also the
principal heirs and creditors of
As to the source of authority the estate.
Agent derives As to the requirement of bond
authority from the
principal and his Guardian derives Judicial Administrator,
authority may at any authority from the Agent does not file a before entering into
time be abrogated or court. bond. his duties, is required
modified by the to file a bond
principal.
As to control of the Agent/Administrator
As to the appointing authority
The acts of an
Agent is appointed by Agent is controlled
Guardian is appointed administrator are
the principal and can by the principal
by the court, and subject to specific
be removed by the through the
stands in loco parentis. provisions of law and
latter. agreement.
orders from the court.
As to being subject to represented person
Agency v. Lease of Services

Guardian is not subject
Agent is subject to to the
directions of the directions of the ward, AGENCY LEASE OF SERVICES
principal. but must act for the As to representation by the agent or worker
ward’s benefit.
Worker or lessor of
As to liability Agent represents the services does not
principal. represent his
Guardian has no
Agent can make the employer.
power to impose
principal personally
personal liability on
liable. As to termination of relationship
the ward.
Relationship can be
Generally, relationship
terminated at the will
can be terminated only
of either principal or
at the will of both.
agent.

Agency
As to the kind of function he exercises Agency v. Trust
Agent exercises The lessor ordinarily

AGENCY TRUST
discretionary performs only
powers. ministerial functions. As to the capacity
to hold title over the property
Agency v. Partnership Trustee may hold
Agent usually holds no
legal title to the
title at all.
AGENCY PARTNERSHIP property.
As to his actions As to his actions
Agent usually acts in

A partner acts not only Trustee may act in his
the name of the
for his co-partners and own name.
Agent acts in the name principal.
the partnership but
of the principal.
also as principal of As to the termination of the relationship
himself.
Trust usually ends by

As to the control by the principal Agency usually may be
the accomplishment
terminated or revoked
A partner’s power to of the purposes for
any time.
bind his co-partner is which it was formed.
An agent must submit not subject to the co-
to the principal’s right partner’s right to
As to the scope of authority over property
to control. control, unless there is
an agreement to that Agency may not be Trust involves
effect. connected at all with control over
property. property.
As to liability
As to the binding effect of the contracts
The ordinary agent A partner acting as entered into by them
assumes no personal agent for the
liability where he acts partnership binds not Trustee does not
Agent has authority to
within the scope of his only the firm members necessarily or even
make contracts which
authority. but himself as well. possess such
will be binding on his
authority to bind the
principal.
As to sharing of profits trustor.
As to its creation
The alleged owner or
partner takes his Trust may be the
The profits belong to
agreed share of profits, Agency is really a result of a contract; it
all the parties as
not as owner but as an contractual relation. may also be created
common proprietors
agreed measure of by law.
in agreed proportions.
compensation for his
services or the like.

2022 GOLDEN NOTES
Civil Law
Kinds of agency as to the extent of powers above sugar crop loans nor filed a case to collect
conferred or foreclose the mortgage.
An agency may be couched in: Thus Remedios and Roy filed a Petition before
1. General terms – It is one which is created in the RTC to cancel the liens annotated on the
general terms and is deemed to comprise only titles of the mortgated properties on grounds of
acts of administration. (Art. 1877, NCC) prescription and extinction of their loan
2. Specific terms – It is necessary to perform any act obligation.
of strict ownership. (De Leon, 2019)
The CA ruled that when mortgagors Sian
Scope of authority of an agent Agricultural Corporation, Sebastian and Marina
de la Pena and Spouses Jerome Gonzales and
The agent must act within the scope of his authority. Perla Sian-Gonzales as registered owners of Lots
He may do such acts as may be conducive to the 1, 8, 214, 215,213-B and 96, respectively,
accomplishment of the purpose of the agency. (Art. authorized petitioner-appellee and her son Roy
1881, NCC) Sian Liamsiaco to mortgage their properties,
they allowed a burden to be placed therein
However, the limits of the agent’s authority shall not bearing the risk of losing it if the loans were not
be considered exceeded should it have been paid. It is because of this risk that mortgagors
performed in a manner more advantageous to the should be absolute owners, or, that special
principal than that specified by him. (Art. 1882, NCC) authority from the owners of the properties
must be given before their properties can be
Q: Remedios obtained a P142,500.00 sugar crop encumbered through mortgage.
loan from Maybank which was payable within
one year. Through a Special Power of Attorney Since the lifting of this encumbrance is a benefit
(SPA), Remedios executed a Real Estate that would free the owners of the risk of losing
Mortgage (REM) on the following parcels of their properties, it is only a matter of course that
land: (a) Lot 8, covered by Transfer Certificate of the special power to mortgage includes the
Title No. (TCT) T-74488, which is owned by Sian authority to discharge it from the burden. Does
Agricultural Corporation; (b) Lot 1, covered by the authority to encumber one's land title
TCT No. 55619, which is owned by spouses naturally includes the authority to perform acts
Sebastian and Marina de la Pena. Subsequently to disencumber such title?
in 1982, Remedios and her son Roy Sian-
Limsiaco (Roy) obtained another sugar crop A: YES. Article 1882 of the Civil Code expressly
loan for P307,700.00 which was likewise due provides: The limits of the agent's authority shall
after one year. not be considered exceeded should it have been
performed in a manner more advantageous to the
Through another SPA, Roy executed a REM on principal than that specified by him. Given this and
the following parcels of land owned by Spouses considering that respondent was already given
Jerome Gonzales and Perla Sian-Gonzales:(a) special authority to encumber the mortgagors-
Lot 214, covered by TCT No. T-121539; (b) Lot principals' titles with the subject mortgage
215, covered by TCT No. T-121540; (c) Lot213- contracts, then it is indeed implicit that respondent
B, covered by TCT No. T-121541;(d) Lot 96, is also authorized to do all the necessary acts to
covered by TCT No. T-80515. Likewise, in 1984, release the mortgagors-principals from such
Remedios obtained another sugar crop loan for encumbrance. Thus, the filing of the instant case to
P110,000.00 also secured by a REM on Lot 8 cancel the mortgage liens, which were annotated in
owned by Sian Agricultural Corporation the mortgagor-principals' respective titles through
Maybank never demanded payment of the the special authority granted by them to
respondent, should be considered within the limits

Agency
of respondent's authority since disencumbering the Rule as to when the Principal is NOT Bound by
mortagagors-principals' titles of the same mortgage the act of the agent
liens are obviously advantageous to the latter.
Moreover, the registered owners of the mortgaged 1. GR: When the act is without or beyond the
lands (alleged to be the real parties-in-interest) scope of his authority in the principal’s name.
never questioned the authority of respondent all XPNs:
throughout the proceedings nor did they file any a. Where the acts of the principal have
pleading or motion to that effect. In short, the real contributed to deceive a 3rd person in
parties-in-interest effectively ratified the act of good faith;
respondent of filing an action to cancel the b. Where the limitations upon the power
mortgage. (Maybank Ph., Inc. v. Sian-Limsiaco, G.R. created by the principal could not have
No. 196323, 08 Feb. 2021) been known by the 3rd person;
c. Where the principal has placed in the
Instances when the act of an agent is binding to hands of the agent instruments signed
the principal by him in blank; and
d. Where the principal has ratified the acts
1. When the agent acts as such without expressly of the agent.
binding himself or does not exceed the limits of
his authority. (Art. 1897, NCC) 2. GR: When the act is within the scope of the
2. If principal ratifies the act of the agent which agent’s authority but in his own name.
exceeded his authority. (Art. 1898, NCC)
3. Circumstances where the principal himself was, XPN: When the transaction involves things
or ought to have been aware. (Art. 1899, NCC) belonging to the principal. (Art. 1883, NCC)
4. If such act is within the terms of the power of
attorney, as written. (Arts. 1900 & 1902, NCC) NOTE: The limits of the agent’s authority shall not be
5. Principal has ratified, or has signified his considered exceeded should it have been performed
willingness to ratify the agent’s act. (Art. 1901, in a manner more advantageous to the principal than
NCC) that specified by him. (Art. 1882, NCC)
Effects of the Acts of an Agent RIGHTS OF AGENTS
1. With authority Right of agent to retain in pledge object of agency

a. In principal’s name – Valid (Legal Pledge) (2015 BAR)
b. In his own name – Not binding on the
principal; agent and stranger are the The agent may retain in pledge the things which are
only parties, except regarding things the object of the agency until the principal effects the
belonging to the principal or when the reimbursement and pays the indemnity:
principal ratifies the contract or derives 1. If principal fails to reimburse the agent the
benefit therefrom. necessary sums, including interest, which the
2. Without authority latter advanced for the execution of the agency.
a. In principal’s name – Unenforceable but (Art. 1912, NCC)
may be ratified, in which case, may be
validated retroactively from the 2. If principal fails to indemnify the agent for all
beginning. damages which the execution of the agency may
b. In his own name – Valid on the agent, but have caused the latter, without fault or
not on the principal. (De Leon, 2019) negligence on his part. (Art. 1913, NCC)

2022 GOLDEN NOTES
Civil Law
Rule where two persons deal separately with the maintain an action on his own behalf against the
agent and the principal other party for its breach.
If the two contracts are incompatible with each An agent entitled to receive a commission from his
other, the one of prior date shall be preferred. This is principal upon the performance of a contract which
subject however to the rule on double sale under Art. he has made on his principal's account does not, from
1544 of the NCC. (Art. 1916, NCC) this fact alone, have any claim against the other party
for breach of the contract, either in an action on the
NOTE: Rules of preference in double sale contract or otherwise.
1. Personal property – possessor in good faith An agent who is not a promisee cannot maintain an
2. Real property action at law against a purchaser merely because he
a. Registrant in good faith; is entitled to have his compensation or advances paid
b. In the absence of inscription, possessor in out of the purchase price before payment to the
good faith; principal. (Uy v. CA, G.R. No. 120465, 09 Sept. 1999)
c. In the absence of possession, person with the
oldest title in good faith. (Art. 1544, NCC)
If agent acted in good faith, the principal shall be

liable for damages to the third person whose
contract must be rejected. If agent is in bad faith, he
alone shall be liable. (Art. 1917, NCC)
A person acting as an agent cannot escape

criminal liability by virtue of the contract of
agency
The law on agency has no application in criminal

cases. When a person participates in the commission
of a crime, he cannot escape punishment on the
ground that he simply acted as an agent of another
party. (Ong v. CA, G.R. No. 119858, 29 Apr 2003)
An agent cannot maintain an action against

persons with whom they contracted on behalf of
his principal.
Agents are not a party with respect to that contract

between his principal and third persons. As agents,
they only render some service or do something in
representation or on behalf of their principals. The
rendering of such service did not make them parties
to the contracts of sale executed in behalf of the
latter.
The fact that an agent who makes a contract for his

principal will gain or suffer loss by the performance
or non-performance of the contract by the principal
or by the other party thereto does not entitle him to

Agency
principal if he has been authorized to lend

B. OBLIGATIONS OF THE AGENT money at interest; (Art. 1890, NCC)
10. Render an account of his transactions and to

deliver to the principal whatever he may have
Specific obligations of an agent to the principal
received by virtue of the agency, even though it
may not be owing to the principal; (Art. 1891,
1. Carry out the agency;
NCC)
2. Answer for damages which, through his non-

NOTE: Every stipulation exempting the agent
performance, the principal may suffer;
from the obligation to render an account shall be
void. (Art. 1891(2), NCC)
3. Finish the business already begun on the death of
the principal, should delay entail any danger;
11. Distinguish goods by countermarks and
(Art. 1884, NCC)
designate the merchandise respectively
belonging to each principal, in the case of a
NOTE: The agency shall also remain in full force
commission agent who handles goods of the
even after the death of the principal if it has been
same kind and mark, which belong to different
constituted in the common interest of the latter
owners; (Art. 1904, NCC);
and of the agent, or in the interest of a third
person who has accepted the stipulation in his
12. Be responsible in certain cases for the acts of the
favor. (Art. 1930, NCC)
substitute appointed by him; (Art. 1892, NCC)
(1999 BAR)
4. Observe the diligence of a good father of a family
in the custody and preservation of the goods
13. Pay interest on funds he has applied to his own
forwarded to him by the owner in case he
use; (Art. 1896, NCC)
declines an agency, until an agent is appointed;
(Art. 1885, NCC)
14. Inform the principal, where an authorized sale of
credit has been made, of such sale; (Art. 1906,
NOTE: The owner shall as soon as practicable
NCC)
either appoint an agent or take charge of the
goods.
15. Bear the risk of collection and pay the principal
the proceeds of the sale on the same terms
5. Advance the necessary funds should there be a
agreed upon with the purchaser, should he
stipulation to do so except when the principal is
receive also on sale, a guarantee commission;
insolvent; (Art. 1886, NCC)
(Art. 1907, NCC) (2004 BAR)
6. Act in accordance with the instructions of the

16. Indemnify the principal for damages for his
principal and in default thereof, do all that a good
failure to collect the credits of his principal at the
father of a family would do; (Art. 1887, NCC)
time that they become due; (Art. 1908, NCC)
7. Not to carry out the agency if its execution would

17. Be responsible for fraud or negligence. (Art.
manifestly result in loss or damage to the
1909, NCC; De Leon, 2014)
principal; (Art. 1888, NCC)
NOTE: The court shall judge with more or less rigor,

8. Answer for damages if there being a conflict
the fault or negligence of the agent, according to
between his interests and those of the principal,
whether the agency was or was not for
he should prefer his own; (Art. 1889, NCC)
compensation. (Art. 1909, NCC)
9. Not to loan to himself without the consent of the

2022 GOLDEN NOTES
Civil Law
Instructions NOTE: If an act done by an agent is within the

apparent scope of the authority with which he has
Private directions which the principal may give the been clothed, it matters not that it is directly
agent in regard to the manner of performing his contrary to the instructions of the principal. The
duties as such agent but of which a third party is principal will, nevertheless, be liable unless the third
ignorant are said to be secret if the principal person with whom the agent dealt knew that he was
intended them not to be made known to such party. exceeding his authority or violating his instructions.
(De Leon, 2019)
Third persons dealing with an agent do so at their
Obligation of a person who declines an agency peril and are bound to inquire as to the extent of his
authority but they are not required to investigate the
A person who declines an agency is still bound to instructions of the principal. (De Leon, 2019)
observe the diligence of a good father of the family in
the custody and preservation of goods forwarded to Breach of loyalty of the agent
him by the owner. This is based on equity. (Ibid.)
In case of breach of loyalty, the agent is NOT entitled
Authority v. Principal’s instructions to commission. The forfeiture of the commission will
take place regardless of whether the principal suffers
AUTHORITY INSTRUCTIONS any injury by reason of such breach of loyalty. It does
not even matter if the agency is for a gratuitous one,
As to the scope or that the principal obtained better results, or that
Contemplates only a usage and customs allow a receipt of such a bonus.
Sum total of the
private rule of guidance
powers committed to When the obligation to account not applicable
to the agent;
the agent by the
independent and
principal 1. If the agent acted only as a middleman with the
distinct in character
task of merely bringing together the vendor and
As to the relationship to the agent vendees.
Relates to the 2. If the agent informed the principal of the
Refers to the manner or gift/bonus/profit he received from the
subject/ business or
mode of agent’s action purchaser and his principal did not object
transactions with
with respect to matters thereto.
which the agent is
within the scope of 3. Where a right of lien exists in favor of the agent.
empowered to deal or
permitted action (Ibid.)
act
As to third persons Sub-Agent
Limitations of A sub-agent is a person employed or appointed by an

Without significance as
authority are agent as his agent, to assist him in the performance
against those dealing
operative as against of an act for the principal which the agent has been
with the agent with
those who have or are empowered to perform.
neither knowledge nor
charged with
notice of them
knowledge of them Unless prohibited by the principal, the agent may
As to purpose appoint a sub-agent or substitute. However, an agent
may not delegate to a sub-agent where the work
Contemplated to be Not expected to be made
entrusted to him by the principal to carry out
made known to third known to those with
requires special knowledge, skill or competence
persons dealing with whom the agent deals
unless he has been authorized to do so by the
the agent (De Leon, 2014)
principal. (Ibid.)

Agency
Effects of Substitution NOTE: When the transaction involves things

belonging to the principal, his remedy is to sue the
1. When substitution is prohibited– All acts of the agent for damages because of failure to comply
substitute shall be void. (Art. 1892(2), NCC) with the agency.
2. When substitution is authorized Within the scope of the written power of

a. The principal did not designate any attorney but agent has actually exceeded his
particular person – The substitution has authority according to an understanding
the effect of releasing the agent from his between him and the principal
responsibility unless the person
appointed is notoriously incompetent or 1. Insofar as third persons are concerned (they
insolvent. (Art. 1892(2), NCC) are not required to inquire further than the
b. The principal designated the substitute – terms of the written power), agent acted
Results in the absolute exemption of the within scope of his authority;
agent. 2. Principal is estopped.
3. When substitution not authorized, but not With improper motives

prohibited– Valid if the substitution is beneficial
to the principal but if the substitution has Motive is immaterial; as long as within the scope
occasioned damage to the principal, the agent of authority, valid.
shall be primarily responsible for the act of the
With misrepresentations by the agent
substitute. (De Leon, 2019)
1. Authorized – principal still liable
SUMMARY OF RULES: ACTS OF AN AGENT 2. Beyond the scope of the agent’s authority
In behalf of the principal, GR: Principal is not liable.

within the scope of authority
XPN: Principal takes advantage of a contract or
1. Binds principal; receives benefits made under false representation
2. Agent not personally liable. of his agent.
Mismanagement of the business by the agent

Without or beyond scope of authority
1. Principal still responsible for the acts
Contract is unenforceable as against the principal contracted by the agent with respect to 3rd
but binds the agent to the third person. persons;
2. Principal, however, may seek recourse from
Binding on the principal when: the agent.
1. Ratified; or
2. The principal allowed the agent to act as Tort committed by the agent
though he had full powers.
Principal civilly liable so long as the tort is
committed by the agent while performing his
Within the scope of authority
duties in furtherance of the principal’s business.
but in the agent’s name
1. Not binding on the principal; Agent in good faith
2. Principal has no cause of action against the 3 rd but prejudices third parties
parties and vice versa Principal is liable for damages.

2022 GOLDEN NOTES
Civil Law
Third party’s Liabilities to Agent presentation of the power of attorney or the

instructions as regards the agency. (Art. 1902, NCC)
GR: A third party’s liability on agent’s contracts is to
the principal, not to the agent. Q: When may the actual or apparent authority of
the agent bind the principal?
XPNs: A third party subjects himself to liability at the
hands of the agent where the: A: The principal is bound by the acts of the agent on
his behalf, whether or not the third person dealing
1. Agent contracts in his own name for an with the agent believes that the agent has actual
undisclosed principal; authority, so long as the agent has actual authority,
2. Agent possesses a beneficial interest in the express or implied. (De Leon, 2019)
subject matter of the agency;
3. Agent pays money of his principal to a third Doctrine of Apparent Authority
party by mistake under a contract which proves
subsequently to be illegal, the agent being The doctrine provides that even if no actual authority
ignorant of the illegality; and has been conferred on an agent, his or her acts, as
4. Third party commits a tort against the agent. (De long as they are within his or her apparent scope of
Leon, 2019) authority, bind the principal. (Calubad v. Ricarcen
Development Corporation, G.R. No. 202364, 30 Aug.
Scope of the agent’s authority as to third persons 2017)
It includes not only the actual authorization The existence of apparent authority may be
conferred upon the agent by his principal but also ascertained through:
that which is apparent or impliedly delegated to him. 1. The general manner in which the principal holds
(De Leon, 2019) out an agent as having the power to act, with
which it clothes him; or
Q: When is a third person required to inquire into 2. The acquiescence of the principal in the agent’s
the authority of the agent? acts of a particular nature, with actual or
constructive knowledge thereof, within or
A: beyond the scope of his authorities. (Sargasso
1. Where authority is not in writing – Every person Const. & Dev. Corp. v. Philippine Ports Authority,
dealing with an assumed agent is put upon an G.R. No. 170530, 05 July 2010)
inquiry and must discover upon his peril, if he
would hold the principal liable, not only the fact The principal is liable only as to third persons who
of the agency but the nature and extent of the have been led reasonably to believe by the conduct
authority of the agent. (Safic Alcan & CIE v. of the principal that such actual authority exists,
Imperial Vegetable Oil Co., Inc., G.R. No. 126751, although none has been given. (Banate v. Philippine
28 Mar. 2001) If he does not make an inquiry, he Countryside Rural Bank, Inc., G.R. No. 163825, 13 July
is chargeable with knowledge of the agent’s 2010)
authority, and his ignorance of that authority
will not be an excuse.
2. Where authority is in writing –if authority of an
agent is in writing, such person is not required to
inquire further than the terms of the written
power of attorney. (De Leon, 2019)
NOTE: A third person with whom the agent wishes

to contract on behalf of the principal may require the

Agency
Apparent Authority v. Authority by Estoppel Marilyn and Calubad. Should Ricarcen be bound
by the allegedly representative acts of Marilyn?
Apparent Authority Authority by Estoppel
A: YES. Ricarcen should be bound by the acts of
As to the knowledge of the principal of Marilyn, whom it had clothed with apparent
the authority of the agent authority. The doctrine of apparent authority that is
Arises when the based on the principle of estoppel, in accordance
principal, by his with Articles 1431 and 1869 of the New Civil Code,
Though not actually culpable negligence, provides that even if no actual authority has been
granted, the principal permits his agent to conferred on an agent, his or her acts, as long as they
knowingly permits exercise powers not are within his or her apparent scope of authority,
the agent to exercise granted to him, even bind the principal.
or holds him out as though the principal
possessing may have no notice or In the case at bar, it was within Marilyn’s scope of
knowledge of the authority as president to act for and enter into
agent’s conduct contracts in Ricarcen’s behalf. This could be seen
with how the corporate secretary entrusted her
As to the establishment of the authority
with blank yet signed sheets of paper to be used at
Founded on the her discretion, which apparently caused the
Founded in conscious
principal’s negligence in execution of the allegedly falsified secretary
permission of acts
failing properly to certificates. It reasonably appeared that Ricarcen’s
beyond the powers
supervise the affairs of officers knew of the mortgage contracts entered
granted
the agent into by Marilyn in Ricarcen’s behalf as proved by the
checks drawn and issued by Ricarcen as payments
Q: Marilyn R. Soliman (“Marilyn”), allegedly to Calubad for the monthly interest and principal
acting on behalf of Ricarcen Development loans. Calubad, as an innocent third party dealing in
Corporation (“Ricarcen”) of which she was good faith with Marilyn, should not be made to
president, took out a total of P 7,000,000.00 loan suffer because of Ricarcen's negligence in
from Arturo C. Calubad (“Calubad”) at a conducting its own business affairs. If a private
compounded monthly interest rate, which was corporation intentionally or negligently clothes its
secured by a real estate mortgage over officers or agents with apparent power to perform
Ricarcen’s real property in Quezon City. acts for it, the corporation will be estopped to deny
that such apparent authority is real, as to innocent
To prove her authority to execute the three third persons dealing in good faith with such
mortgage contracts on Ricarcen’s behalf, officers or agents. (Calubad v. Ricarcen Dev. Corp.,
Marilyn presented Calubad with a Board G.R. No. 202364, 30 Aug. 2017)
Resolution and Secretary’s Certificates, later
alleged to be falsified. Due to Ricarcen’s failure Q: Performance Forex Corp. is a corporation
to pay its loan, the mortgage was foreclosed, operating as a financial broker/agent between
eventually resulting to the issuance of a market participants in foreign exchange
Certificate of Sale in favour of Calubad as the transactions. Cancio and Pampolina accepted
highest bidder, and thus, the issuance of a the invitation of Performance Forex Corp.’s
certificate of title in his name. agent, Hipol, to open a joint account with
Performance Forex Corp. Hipol was authorized
When Ricarcen discovered these transactions of by Performance Forex Corp. to follow and
Marilyn, it filed before the Regional Trial Court execute the trade orders of Cancio and
(“RTC”) a complaint for Annulment of Real Pampolina.
Estate Mortgage and Extrajudicial Foreclosure
of Mortgage and Sale, with Damages against

2022 GOLDEN NOTES
Civil Law
However, it was later found out that Hipol did Rules regarding estoppel in agency
not execute the orders of Cancio and Pampolina
and instead made unauthorized transactions 1. Estoppel of agent – One professing to act as agent
resulting into the loss of all of their money. for another may be estopped to deny his agency
Hence, Cancio and Pampolina filed a complaint both as against his asserted principal and the
for damages against both Performance Forex third persons interested in the transaction in
Corp. and its agent, Hipol for what happened. Is which he engaged.
Performance Forex Corp. solidarily liable to
Cancio and Pampolina for Hipol’s acts? 2. Estoppel of principal
a. As to agent – One who knows that another is
A: NO. A principal who gives broad and unbridled acting as his agent and fails to repudiate his
authorization to his or her agent cannot later hold acts, or accepts the benefits, will be estopped
third persons who relied on that authorization to deny the agency as against the other.
liable for damages that may arise from the agent's b. As to sub-agent – To estop the principal from
fraudulent acts. Hipol was not employed with denying his liability to a third person, he
Performance Forex Corp. He was categorized as an must have known or be charged with
independent broker for commission. Cancio and knowledge of the fact of the transaction and
Pampolina conferred trading authority to Hipol and the terms of the agreement between the
thus made him their agent. Performance Forex Corp. agent and sub-agent.
was not privy to how Cancio and Pampolina c. As to third persons – One who knows that
instructed Hipol to carry out their orders. another is acting as his agent or permitted
another to appear as his agent, to the injury
Thus, since the acts of Hipol were the direct cause of of third persons who have dealt with the
the injury, there is no reason to hold Performance apparent agent as such in good faith and in
Forex Corp. liable for actual and moral damages. If the exercise of reasonable prudence, is
there was any fault, the fault remains with Hipol and estopped to deny the agency.
him alone. (Cancio v. Performance Foreign Exchange
Corp., G.R. No. 182307, 06 June 2018) 3. Estoppel of third persons – A third person, having
dealt with one as agent may be estopped to deny
AGENCY BY ESTOPPEL the agency as against the principal, agent, or
third persons in interest.
It is when the principal is bound by the acts of his 4. Estoppel of the government – The government is
agent with the apparent authority which he not estopped by the mistake or error on the part
knowingly permits the agent to assume, ot which he of its agents. (Republic v. Bacas, G.R. No. 182913,
holds the agent out to the public as possessing (AFP 20 Nov. 2013)
Retirement and Separation Benefits System
[AFPRSBS], G.R. No. 207586, 16 Aug. 1969) Q: In an expropriation case between RP and
several property owners in Mandaluyong for
Requisites of Agency by Estoppel construction of the EDSA-Shaw Boulevard
Overpass Project, decision was rendered against
1. The principal manifested a representation of the the RP. The RP through the OSG received the
agent’s authority or knowingly allowed the decision on October 7, 2002 but it was only
agent to assume such authority; October 20, 2003 that RP filed a petition for
2. The third person, in good faith, relied upon such certiorari. It resorted to an independent civil
representation; and action because it failed to file within the 15-day
3. Relying upon such representation, such third reglementary period. Is the Republic bound and
person has changed his position to his put in estoppel by the gross negligence/mistake
detriment. (Country Bankers Ins. Corp. v. Keppel of its agent/former counsel?
Cebu Shipyard, G.R. No. 166044, 18 June 2012)

Agency
A: While the Republic or the government is usually this purpose has to be placed in his possession and at
not estopped by the mistake or error on the part of its his disposal. (Jurado, 2019)
officials or agents, the Republic cannot now take
refuge in the rule as it does not afford a blanket or Broker
absolute immunity. The pronouncement in Republic
v. CA (G.R. No. 104678, 20 July 1992) is instructive: the He is a middleman or intermediary who, in behalf of
Solicitor-General may not be excused from its others, and for a commission or fee, negotiates
shortcomings by invoking the doctrine as if it were contracts or transactions relative to real or personal
some magic incantations that could benignly, if property.
arbitrarily, condone and erase its errors.
NOTE: Distinguished from an agent: An agent is
The rule on non-estoppel of the government is not authorized to enter into judicial acts in behalf of the
designed to perpetrate an injustice. In general, the principal but a true broker is merely an intermediary
rules on appeal are created and enforced to ensure between the parties and he has no power to enter
the orderly administration of justice. The judicial into a contract in behalf of any of the parties. (CIR v.
machinery would run aground if late petitions, like Cadwallader Pacific Co., G.R. No. L-20343, 29 Sept.
the present one, are allowed on the flimsy excuse 1976)
that the attending lawyer was grossly lacking in
vigilance. (Leca Realty Corp. v. Republic, G.R. Nos. Rules
155605 & 160179, 27 Sept. 2006)
1. Efficient and procuring cause – a principle in the
Implied Agency v. Agency by Estoppel law on agency whereby the broker, to be entitled
to compensation, must be the efficient agent or
IMPLIED AGENCY AGENCY BY ESTOPPEL procuring cause of the sale;
As to liability between principal and agent 2. Ready-willing-and-able Rule – a principle which

If caused by the “agent,” states that for a broker to be entitled to
Agent is a true agent, commission, he must provide a person who is
he is not considered a
with rights and ready, willing and able both to accept and live up
true agent, hence, he has
duties of an agent. to the terms offered by his principal; (Albano,
no rights as such.
2013)
As to liability to third persons
3. Procuring Cause - Procuring cause is meant to be
1. If caused by the the proximate cause. The term procuring cause,
principal, he is in describing a broker’s activity, refers to a cause
liable, but only if originating a series of events which, without
The principal is the third person break in their continuity, result in
always liable; acted on the accomplishment of prime objective of the
The agent is never misrepresentation; employment of the broker producing a
personally liable. purchaser ready, willing and able to buy real
2. If caused by the agent estate on the owner’s terms. A broker will be
alone, only the agent regarded as the procuring cause of a sale, so as
is liable. to be entitled to commission, if his efforts are the
foundation on which the negotiations resulting
Factor or Commission agent in a sale are begun. The broker must be the
efficient agent or the procuring cause of the sale.
One who is engaged in the business of buying and The means employed by him and his efforts must
selling for a principal of personal property, which for result in the sale. He must find the purchaser,
and the sale must proceed from his efforts acting

2022 GOLDEN NOTES
Civil Law
as broker. (Medrano v. CA, G.R. No. 150678, 18 AGENCY COUCHED IN GENERAL TERMS
Feb. 2005) (1992 BAR)
Factorage It is created in general terms and is deemed to

comprise only acts of administration even if the
It is the compensation of a factor or commission principal should state:
agent.
1. That he withholds no power;
NOTE: A factor or commission agent is one whose 2. That the agent may execute such acts as he may
business is to receive and sell goods for a consider appropriate; or
commission; also called factorage. (De Leon, 2019) 3. That the agency should authorize a general and
unlimited management. (Art. 1877, NCC)
Ordinary commission
Acts of administration
It is the fee or compensation for the sale of goods
which are placed in the agent’s possession and at his Refers to those acts which do not imply the authority
disposal. to alienate for the exercise of which an express
power is necessary. (De Leon, 2019)
Guarantee commission or del credere
commission (2004 BAR) Unless the contrary appears, the authority of an
agent is presumed to include all the necessary and
It is the additional fee or compensation which is usual means to carry out the agency into effect.
given in return for the risk that the agent has to bear
in the collection of credits. NOTE: Payment is an act of administration when it is
made in the ordinary course of management. (Art.
Should the commission agent receive on sale, in 1878, NCC; De Leon, 2019)
addition to the ordinary commission, a guarantee
commission shall: The making of customary gifts for charity, or those
(i) bear the risk of collection; and made to employees in the business managed by the
(ii) pay the principal the proceeds of the agent are considered acts of administration. (Art.
sale on the same terms agreed upon 1878, NCC; De Leon, 2019)
with the purchaser. (Art. 1907, NCC)
AGENCY REQUIRING
The purpose of the guarantee commission is to SPECIAL POWER OF ATTORNEY
compensate the agent for the risks he will have to
bear in the collection of the credit due the principal. Special power of attorney (SPA)
(De, Leon, 2019)
It is an instrument in writing by which one person, as
Del credere agent principal, appoints another as his agent and confers
upon him the authority to perform certain specified
He is the agent who guarantees payment of the acts or kinds of acts on behalf of the principal with a
customer’s account in consideration of the higher primary purpose to evidence agent’s authority to
commission. A del credere agent may sue in his name third parties with whom the agent deals. (De Leon,
for the purchase price in the event of non- 2019)
performance by the buyer. (De Leon, 2019)
NOTE: The requirement of an SPA refers to the
nature of the authorization and not to is form. If the
SPA is not written, then it must be duly established

Agency
by evidence. Gozun v. Mercado, G.R. No. 167812, 19 12. To make gifts, except customary ones for charity
Dec. 2006) or those made to employees in the business
managed by the agent;
Intervention of a notary public in the validity of 13. To compromise, to submit questions to
an SPA arbitration, to renounce the right to appeal from
a judgment, to waive objections to the venue of
GR: A power of attorney is valid although no notary an action or to abandon a prescription already
public intervened in its execution. (Angeles v. PNR, acquired;
G.R. No. 150128, 31 Aug. 2006) 14. Any other act of strict dominion; and
15. To waive an obligation gratuitously. (Art. 1878,
XPN: When SPA is executed in a foreign country, it NCC)
must be certified and authenticated in accordance
with Sec. 24, Rule 132, ROC. (Sps. Alcantara v. Nido, Limitations to an SPA
G.R. No. 165133, 19 Apr. 2010)
1. A special power to sell excludes the power to
NOTE: The failure to have the special power of mortgage;
attorney (executed in a foreign country) 2. A special power to mortgage does not include
authenticated is not merely a technicality – it is a the power to sell; (Art. 1879, NCC) and
question of jurisdiction. Jurisdiction over the person 3. A special power to compromise does not
of the real party-in-interest was never acquired by authorize submission to arbitration. (Art. 1880,
the courts. (Heirs of Medina v. Natividad, G.R. No. NCC)
177505, 27 Nov. 2008)
NOTE: The scope of the agent’s authority is what
An SPA is required: (1992, 2004 BAR) appears in the written terms of the power of
attorney. While third persons are bound to inquire
1. To create or convey real rights over immovable into the extent or scope of the agent’s authority, they
property; are not required to go beyond the terms of the
2. To enter into any contract by which the written power of attorney. Third persons cannot be
ownership of an immovable is transmitted or adversely affected by an understanding between the
acquired either gratuitously or for a valuable principal and his agent as to the limit of the latter’s
consideration; authority. In the same way, third persons need not
3. To loan or borrow money, unless the latter act be concern themselves with instruction given by the
urgent and indispensable for the preservation of principal to his agent outside of the written power of
the things which are under administration; attorney. (Siredy Enterprises, Inc. v. CA, G.R. No.
4. To lease any real property to another person for 129039, 27 Sept. 2002)
more than one year;
5. To make such payments as are not usually Construction of Powers of Attorney
considered as acts of administration;
6. To obligate principal as guarantor or surety; Powers of attorney are generally construed strictly,
7. To bind the principal to render some service and courts will not infer or presume broad powers
without compensation; from deeds which do not sufficiently include
8. To bind the principal in a contract of property or subject under which the agent is to deal.
partnership; However, the rule is not absolute and should not be
9. To ratify obligations contracted before the applied to the extent of destroying the very purpose
agency; of the power. (De Leon, 2019)
10. To accept or repudiate an inheritance;
11. To effect novation which put an end to Q: X was the owner of an unregistered parcel of
obligations already in existence at the time the land in Cabanatuan City. As she was abroad, she
agency was constituted;

2022 GOLDEN NOTES
Civil Law
advised her sister Y via overseas call to sell the withdrawal of the agent, it is on the condition that no
land and sign a contract of sale on her behalf. damage results to the principal, and if the agent
desires to be relieved of the obligation of making
Y thus sold the land to B1 on March 31, 2001 and reparation when he withdraws for a just cause, he
executed a deed of absolute sale on behalf of X. B1 must continue to act so that no injury may be caused
fully paid the purchase price. B2, unaware of the to the principal. (De Leon, 2019)
sale of the land to B1, signified to Y his interest to
buy it but asked Y for her authority from X.
Without informing X that she had sold the land to

B1, Y sought X for a written authority to sell. X e-
mailed Y an authority to sell the land. Y
thereafter sold the land on May 1, 2001 to B2 on
monthly installment basis for two years, the first
installment to be paid at the end of May 2001.
Who between B1 and B2 has a better right over
the land? Explain. (2010 BAR)
A: B-2 has a better title. This not a case of double sale

since the first sale was void. The law provides that
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, NCC)
The property was sold by Y to B1 without any written

authority from the owner X. Hence, the sale to B1 was
void.
AGENCY BY OPERATION OF LAW
Instances where an agency is created by

operation of law
When the agent withdraws from the agency for a

valid reason, he must continue to act until the
principal has had a reasonable opportunity to take
the necessary steps like the appointment of a new
agent to remedy the situation caused by the
withdrawal; (Art. 1929, NCC) and
In case a person declines an agency, he is bound to

observe the diligence of good father of the family in
the custody and preservation of the goods forwarded
to him by the owner until the latter should appoint
an agent. (Art. 1885, NCC)
NOTE: The law reconciles the interests of the agent

with those of the principal, and if it permits the

Agency
Liability for the contracts entered by the agent

C. OBLIGATIONS OF THE PRINCIPAL
GR: The principal must comply with all the
obligations which the agent may have contracted
within the scope of his authority.
Specific obligations of the principal to the agent
XPN: Where the agent exceeded his authority.

1. Comply with all obligations which the agent may
have contracted within the scope of his authority
XPN to the XPN: When the principal ratifies it
(Art. 1910(1), NCC) and in the name of the
expressly or tacitly. (Art. 1910, NCC)
principal;
2. Advance to the agent, should the latter so request,
NOTE: Based on the principle of estoppel, the
the sums necessary for the execution of the
principal becomes solidarily liable with the agent if
agency;
the former allowed the latter to act as though he had
3. Reimburse the agent for all advances made by
full powers even if the agent has exceeded his
him, even if the business or undertaking was not
authority. (Art. 1911, NCC)
successful, provided the agent is free from fault;
(Art. 1912, NCC)
Liability for tort committed by the agent
4. Indemnify the agent for all damages which the
execution of the agency may have caused the
GR: Where the fault or crime committed by the agent
latter without fault or negligence on his part;
is not in the performance of an obligation of the
(Art. 1913, NCC) and
principal, the latter is not bound by the illicit acts of
5. Pay the agent the compensation agreed upon, or
the agent, even if it is done in connection with the
if no compensation was specified, the reasonable
agency. (De Leon, 2019)
value of the agent’s services. (Arts. 1875 & 1306,
NCC)
XPNs:
1. Where the tort was committed by the agent
Liability for the expenses incurred by the agent
because of defective instructions from the
principal or due to lack of necessary vigilance or
GR: Principal is liable for the expenses incurred by
supervision on his part; or
the agents.
2. When the tort consists in the performance of an
act which is within the powers of an agent but
XPNs:
becomes criminal only because of the manner in
1. If the agent acted in contravention of the
which the agent has performed it; the principal
principal’s instructions, unless principal should
is civilly liable to 3rd persons who acted in good
wish to avail himself of the benefits derived from
faith.
the contract;
2. When the expenses were due to the fault of the
Q: CX executed a special power of attorney
agent;
authorizing DY to secure a loan from any bank
3. When the agent incurred them with knowledge
and to mortgage his property covered by the
that an unfavorable result would ensue, if the
owner’s certificate of title. In securing a loan
principal was not aware thereof; or
from bank, DY did not specify that he was acting
4. When it was stipulated that the expenses would
for CX in the transaction with said bank. Is CX
be borne by the agent, or that the latter would be
liable for the bank loan? Why or why not? Justify
allowed only a certain sum. (Art. 1918, NCC)
your answer. (2004 BAR)
A: While as a general rule the principal is not liable for

the contract entered into by his agent in case the
agent acted in his own name without disclosing his

2022 GOLDEN NOTES
Civil Law
principal, such rule does not apply if the contract unauthorized act.
involves a thing belonging to the principal. In such 2. With respect to principal himself – the principal
case, the principal is liable under Article 1883 of the who ratifies thereby assumes responsibility for
Civil Code. The contract is deemed made on his the authorized act as fully as if the agent acted
behalf. (Sy-Juco v. Sy-Juco, G.R. No. L-13471, 12 Jan. under original authority.
1920) 3. With respect to third persons – where a third
person is liable to a principal under an
Ratification unauthorized act of his agent, the third person
shall not be relieved of his liability on the theory
In agency, ratification is the adoption or that the principal ratified that agent’s acts.
confirmation by one person of an act performed on (Ibid.)
his behalf by another without authority. The
substance of ratification is the confirmation after the Retroactive effect of ratification
act, amounting to a substitute for a prior authority.
(Prieto v. CA, G.R. No. 158597, 18 June 2012) GR: Ratification operates upon an unauthorized act
to have retroactive effect.
Conditions for Ratification
XPNs:
1. The principal must have the capacity and power 1. Where to do so would defeat the rights of third
to ratify; parties which have accrued between the time of
2. He must have had knowledge or had reason to the making of the unauthorized contract and the
know of material or essential facts about the time of the ratification;
transaction; 2. Where to do so would render wrongful an
3. He must ratify the acts in its entirety; otherwise rightful act or omission;
4. The act must be capable of ratification; and 3. Where to do so would allow the circumvention
5. The act must be done in behalf of the principal. of a rule of law formulated in the interest of
(De Leon, 2019) public policy; and
4. If the third party has withdrawn from the
Acts that May be Ratified contract. (Ibid.)
1. Valid/Void acts
2. Voidable acts
3. Unrevoked acts – a principal must ratify his
agent’s unauthorized contact before it is revoked
by the other contracting party
4. Criminal acts
5. Tortious acts (Ibid.)
Effects of ratification by principal
The relation of the principal and agent is created

since ratification by a principal is equivalent to prior
authority.
1. With respect to agent - Ratification relieved the

agent from liability to the third party to the
unauthorized transaction, and to his principal
for acting without authority. The principal
thereby assumes responsibility for the

Agency
from the management is unjustifiable; (Art.

D. MODES OF EXTINGUISHMENT 1927, NCC) (2010, 2015 BAR)
4. If it has been constituted in the common interest
of the principal and the agent; Art. 1930, NCC) or
5. If it has been constituted in the interest of a third
Modes of Extinguishing Agency
person who has accepted the stipulation in his
favor i.e., stipulation pour autrui. (Arts. 1930 &
1. By its revocation;
1311, NCC)
2. By the withdrawal of the agent;
3. By the death, civil interdiction, insanity or
XPN to the XPN: When the agent acts to defraud the
insolvency of the principal or of the agent;
principal.
4. By the dissolution of the firm or corporation
which entrusted or accepted the agency;
Q: A lawyer was given an authority by means of a
5. By the accomplishment of the object or purpose
Special Power of Attorney by his client to sell a
of the agency;
parcel of land for the amount of P3 Million. Since
6. By the expiration of the period for which the
the client owed the lawyer P1 Million in
agency was constituted. (Art. 1919, NCC) (1997
attorney's fees in a prior case he handled, the
BAR)
client agreed that if the property is sold, the
lawyer was entitled to get 5% agent's fee plus P1
NOTE: The list is NOT exclusive. Agency may also be
Million as payment for his unpaid attorney's fees.
extinguished by the modes of extinguishment of
obligations in general whenever they are applicable,
The client, however, subsequently found a buyer
like loss of the thing and novation. (De Leon, 2019)
of his own who was willing to buy the property
for a higher amount. Can the client unilaterally
Agency may be terminated:
rescind the authority he gave in favor of his
lawyer? Why or why not? (2015 BAR)
1. by agreement (Nos. 5 and 6);
2. by the subsequent acts of the parties which may
A: NO, the agency in the case presented is one which
be either:
is coupled with an interest. As a rule, agency is
a. by the act of both parties or by mutual
revocable at will except if it was established for the
consent; or
common benefit of the agent and the principal. In this
b. by unilateral act of one of them (Nos. 1
case, the interest of the lawyer is not merely limited
and 2);
to his commission for the sale of the property but
3. by operation of law (Nos. 3 and 4). (Ibid.)
extends to his right to collect his unpaid professional
fees. Hence, it is not revocable at will. (Art. 1927, NCC)
Kinds of revocation
A contract of agency is impliedly revoked when

Revocation may either be express or implied. (Art.
the principal:
1920, NCC) (2014 BAR)
1. Appoints a new agent for the same business

REVOCATION OF AGENCY BY THE PRINCIPAL
or transaction provided there is
incompatibility; (Art. 1923, NCC)
GR: Agency is revocable at will by the principal. (Art.
1920, NCC)
2. Directly manages the business entrusted to
the agent; (Art. 1924, NCC) or
XPNs: An agency is irrevocable:
3. After granting general power of attorney to
1. If a bilateral contract depends upon it.
an agent, grants a special one to another
2. If it is the means of fulfilling an obligation
agent which results in the revocation of the
already contracted.
former as regards the special matter
3. If partner is appointed manager and his removal

2022 GOLDEN NOTES
Civil Law
involved in the latter. (Art. 1926, NCC) conferred. But the principal must act in good faith
and not merely to avoid his obligation to the agent.
NOTE: A special power of attorney is not revoked by
a subsequent general power of attorney given to XPN: The only desire of the principal is for him and
another agent, unless that the latter refers also to the the agent to manage the business together. (Ibid.)
act authorized under the special power. (Tolentino,
1992) Q: Richard sold a large parcel of land in Cebu to
Leo for P100 million payable in annual
Revocation of agency when the agent is installments over a period of ten years, but title
appointed by two or more principals will remain with Richard until the purchase price
is fully paid. To enable Leo to pay the price,
When two or more principals have granted a power Richard gave him a power-of-attorney
of attorney for a common transaction, any one of authorizing him to subdivide the land, sell the
them may revoke the same without the consent of individual lots, and deliver the proceeds to
the others. (Art. 1925, NCC) Richard, to be applied to the purchase price. Five
years later, Richard revoked the power of
Necessity of notice of revocation attorney and took over the sale of the subdivision
lots himself. Is the revocation valid or not? Why?
1. As to the agent– Express notice is not always (2001 BAR)
necessary; sufficient notice if the party to be
notified actually knows, or has reason to know, A: The revocation is not valid. The power of attorney
a fact indicating that his authority has been given to the buyer is irrevocable because it is coupled
terminated or suspended. Revocation without with an interest – the agency is the means of fulfilling
notice to the agent will not render invalid an act the obligation of the buyer to pay the price of the
done in pursuance of the authority. (De Leon, land. (Art. 1927, NCC) In other words, a bilateral
2019) contract, which is a contract to buy and sell the land,
is dependent on the agency.
2. As to third persons– Express notice is
necessary. Q: Eduardo executed a SPA authorizing Zenaida
a. As to former customers – Actual notice to participate in the pre-qualification and
must be given to them because they bidding of a NIA project and to represent him in
always assume the continuance of the all transactions related thereto. It was granted to
agency relationship. (Art. 1873, NCC) them. Zenaida leased Manuel’s heavy equipment
b. As to other persons – Notice by to be used for the NIA project. Manuel interposed
publication is enough. (Art. 1922, NCC) no objection to Zenaida’s actuations. Eduardo
later revoked the SPA alleging that Zenaida acted
NOTE: There is implied revocation of the previous beyond her authority in contracting with Manuel
agency when the principal appoints a new agent for under the SPA. Records show that Eduardo and
the same business or transaction, provided there is Zenaida entered into a partnership in regard to
incompatibility. But the revocation does not become the NIA project. Decide.
effective as between the principal and the agent until
it is in some way communicated to the latter. (De A: Under Art. 1818 of the NCC, every partner is an
Leon, 2019) agent of the partnership for the purpose of its
business and each one may separately execute all
Effect of direct management by principal acts of administration, unless, under Art. 1801, a
specification of their respective duties has been
GR: The agency is revoked for there would no longer agreed upon, or else it is stipulated that any one of
be any basis for the representation previously them shall not act without the consent of all the
others. As such, even granting that Zenaida exceeded

Agency
the authority granted by the SPA, being a partner in Effect of Death of Principal to the contract of
the constituted partnership between her and agency
Eduardo, she can still execute acts of administration
absent any agreement that one cannot act without GR: The agency is terminated by the death of the
the consent of all others. (Mendoza v. Paule, G.R. No. principal even if the agency is for a definite period.
175885, 13 Feb. 2009) (Lopez v. CA, G.R. No. 163959, 01 Aug. 2018; Art. 1919,
NCC)
WITHDRAWAL OR RENUNCIATION
OF THE AGENCY BY THE AGENT XPNs:
1. If it has been constituted in common interest of
When the agent can withdraw from the agency the principal and the agent.
The agent may renounce or withdraw from the 2. If it has been constituted in the interest of a third
agency at any time, by giving due notice to the person who accepted the stipulation in his favor.
principal. (Art. 1928, NCC; De Leon, 2019) (Arts. 1911 and 1930, NCC).
Duties and responsibilities of the withdrawing 3. Anything done by the agent, without the
agent: knowledge of the death of the principal or on any
other cause which extinguishes the agency is
1. If the principal should suffer any damage by valid and shall be fully effective with respect to
reason of the withdrawal by the agent, the latter third persons who may have contracted with him
must indemnify the principal therefor, unless in good faith. (Art. 1931, NCC)
the agent should base his withdrawal upon the
impossibility of continuing the performance of NOTE: The death of the principal extinguishes the
the agency without grave detriment to himself. agency; but in the same way that revocation of the
(Art. 1928, NCC) agency does not prejudice third persons who
have dealt with the agent in good faith without
2. The agent must continue to act until the principal notice of the revocation. (Arts. 1921 and 1922,
has had reasonable opportunity to take the NCC) The death of the principal does not render
necessary steps to meet the situation, even if he the act of an agent unenforceable, where the
should withdraw from the agency. (Art. 1929, latter had no knowledge of such extinguishment
NCC) of the agency. (Hererra v. Luy Kim Guan, G.R. No.
L-17043, 31 Jan. 1961)
Kinds of Withdrawal by the Agent
4. The agent is bound by his acceptance to carry out
1. Without just cause– The law imposes upon the the agency and is liable for the damages which,
agent the duty to give due notice to the principal through his non-performance, the principal may
and to indemnify the principal should the latter suffer. He must also finish the business already
suffer damage by reason of such withdrawal. began on the death of the principal, should delay
(Art. 1928, NCC) entail any danger. (Art. 1884, NCC)
2. With just cause– If the agent withdraws from the Duty of Agent’s Heirs Upon the Death of Agent
agency for a valid reason (Art. 1929. NCC) as
when the withdrawal is based on the If the agent dies, his heirs must notify the principal
impossibility of continuing with the agency thereof, and in the meantime adopt such measures as
without grave detriment to himself (Art. 1928, the circumstances may demand in the interest of the
NCC) or is due to a fortuitous event (Art. 1174, latter. (Art. 1932, NCC)
NCC), the agent cannot be held liable. (De Leon,
2019)

2022 GOLDEN NOTES
Civil Law
Heirs continuing the contract of agency XPNs:

1. If substitution is possible without substantial
GR: Heirs cannot continue the contract of agency. detriment to either party;
The rights and obligations of the agent arising from 2. If the destroyed subject matter was not in fact
the contract are not transmissible to his heirs. essential to the contract. (Ibid.)
Reason: The agency calls for personal services on the Change of circumstance surrounding the
part of the agent since it is founded on a fiduciary transaction
relationship.
GR: The authority of the agent is terminated where
XPNs: there is a basic change in the circumstances
1. Agency by operation of law, or a presumed or surrounding the transaction which was not
tacit agency; and contemplated by the parties and would reasonably
2. Agency is coupled with an interest in the subject lead the agent to believe that the principal would not
matter of the agency (e.g., power of sale in a desire him to act.
mortgage). (De Leon, 2019)
XPNs:
Q: Is the sale of the land by the agent after the 1. If the original circumstances are restored within
death of the principal valid? a reasonable period of time, the agent's
authority may be revived;
A: Art. 1931 provides that an act done by the agent 2. Where the agent has reasonable doubts as to
after the death of the principal is valid and effective whether the principal would desire him to act,
if these two requisites concur: his authority will not be terminated if he acts
1. That the agent acted without the knowledge of reasonably; or
the death of the principal; and 3. Where the principal and agent are in close daily
2. That the third person who contracted with the contact, the agent's authority to act will not
agent himself acted in good faith. terminate upon a change of circumstances if the
agent knows the principal is aware of the change
Good faith here means that the third person was not and does not give him new instructions. (De
aware of the death of the principal at the time that he Leon, 2019)
contracted with said agent. These two requisites must
concur: the absence of one will render the act of the agent
invalid unenforceable. (Rallos v. Felix Go Chan, G.R. No.
L-24332, 31 Jan. 1978)
OTHER MODES OF
EXTINGUISHING AN AGENCY
War
During the existence of a state of war, a contract of

agency is inoperative if the agent or the principal is
an enemy alien. (De Leon, 2019)
Loss or destruction of subject matter
GR: The loss or destruction of the subject matter of

agency or the termination of the principal’s interest
therein terminates the agent’s authority.


AGENCY

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What are the characteristics of a contract of agency?

What are the characteristics of a contract of agency?

What are the classifications of agency?

What are the classifications of agency?

Agency

8. Representative relation – The agent acts for

One factor which most clearly distinguishes agency

2. Unilateral – If gratuitous, it creates obligations 2. As to character

UNIVERSITY OF SANTO TOMAS 492

Parties to a contract of agency 1. Between persons who are present – The

493 UNIVERSITY OF SANTO TOMAS

Kinds of Principal NOTE: The theory of imputed knowledge ascribes

UNIVERSITY OF SANTO TOMAS 494

495 UNIVERSITY OF SANTO TOMAS

1. Real existence of emergency; Proving the existence of principal-agent

UNIVERSITY OF SANTO TOMAS 496

of authority, and in case either is controverted, the Agency v. Judicial Administration

Agency v. Guardianship As to the source of authority

Guardian represents As to whom they represent

Agency v. Lease of Services

497 UNIVERSITY OF SANTO TOMAS

As to the kind of function he exercises Agency v. Trust

Agent exercises The lessor ordinarily

Agent usually acts in

Trust usually ends by

UNIVERSITY OF SANTO TOMAS 498

499 UNIVERSITY OF SANTO TOMAS

Effects of the Acts of an Agent RIGHTS OF AGENTS

1. With authority Right of agent to retain in pledge object of agency

UNIVERSITY OF SANTO TOMAS 500

If agent acted in good faith, the principal shall be

A person acting as an agent cannot escape

The law on agency has no application in criminal

An agent cannot maintain an action against

Agents are not a party with respect to that contract

The fact that an agent who makes a contract for his

501 UNIVERSITY OF SANTO TOMAS

principal if he has been authorized to lend

10. Render an account of his transactions and to

2. Answer for damages which, through his non-

6. Act in accordance with the instructions of the

7. Not to carry out the agency if its execution would

NOTE: The court shall judge with more or less rigor,

9. Not to loan to himself without the consent of the

UNIVERSITY OF SANTO TOMAS 502

Instructions NOTE: If an act done by an agent is within the

As to third persons Sub-Agent

Limitations of A sub-agent is a person employed or appointed by an

503 UNIVERSITY OF SANTO TOMAS

Effects of Substitution NOTE: When the transaction involves things

2. When substitution is authorized Within the scope of the written power of

3. When substitution not authorized, but not With improper motives

In behalf of the principal, GR: Principal is not liable.

Mismanagement of the business by the agent

UNIVERSITY OF SANTO TOMAS 504

Third party’s Liabilities to Agent presentation of the power of attorney or the

NOTE: A third person with whom the agent wishes

505 UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 506