Chapter 1- NATURE, FORM & KINDS OF AGENCY

#1868
Concept of Agency This includes all situations in which one person is employed to render service for another, excluding from its concept the relationship of employer and employee, of master and servant and of employer and independent contractor Agency is a fiduciary relationship which implies a power in an agent to contract with a third person on behalf of a principal. It is the power to effect the principals contractual relations with third persons that differentiates the agent from the employee, the servant and the independent contractor. Agency relates to commercial or business transactions. Also in non-business situations, like when a person returns an article to a lender for a borrower-friend (324) Term used in other senses than to denote the relationship of principal & agent Used to denote the place at which the business is transacted. When used in the sense of place of business, the relationship of principal and agent is not necessarily implied Used in the sense of instrumentality by which a thing is done Used to refer to the exclusive right of a person to sell a product of another in a specific territory Characteristics of a Contract of Agency 1. Consensual based on the agreement of the parties which is perfected by mere consent 2. Principal- it can stand by istelf without need of another contract 3. Nominate- it has its own name 4. Unilateral- if it is gratuitous because it creates obligations for only one of the parties, i.e. the agent; or bilateral, if it is for compensation because it gives rise to reciprocal rights and obligations, and 5. Preparatory- it is entered into as a means to an end, i.e., the creation of other transactions or contracts Nature, Basis & Purpose of Agency The word agency when used in its broadest meaning is both a contract and a representative relation 1. Nature a. Manifestation of consent - Since agency is a contract, it is essential that the minds of the parties should meet in making it. Manifestation of consent...the principal must intend that the agent shall act for him, the agent must intend to accept the authority and act on it, and such intention of the parties must find expression either in words or conduct between them. Without such intention, there is generally no agency. The mere fact that an entity may be 100% subsidiary corporation of another corporation of another corporation does not necessarily mean that the former is a duly authorized agent of the latter because it is essential for a contract of agency to exist, that the principal consents that the other party, the agent, shall act on its behalf and the agent consents so as to act. b. Agent, by legal fiction, becomes principal In acting for the principal, the agent, by legal fiction becomes the principal authorized to perform all acts which the latter would have him do. This can only be effected with consent of principal which cannot be compelled by law or by any court. c. Presence/absence of contract or consideration Although the agency is usually a contractual one, wither express or implied, based upon a

consideration, this is not necessarily so; that is, the relationship may be created by operation of law (agency by estoppel), or a person who acts for another as principal may do so gratuitously. Thus, without a contract or consideration there can be an agency or agency powers. In the excercise of got functions, LGUs or municipal corporations act as agents for the sovereign state. The legal consequences of agency may attach where one person acts for another without authority or in excess of his authority and the latter subsequently ratifies it.

2. Basis Agency is also a representative relation. The agent renders some service or does something in rep or on behalf of another a. Personal contract of representation Representation constitutes the basis of agency. As it is a personal contract of representation based on trust and confidence reposed by the principal on his agent, agency is generally revocable. b. Acts of agents, by legal fiction, acts of principal The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if they were personally done by the principal. By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence. Thus a person may make an offer to enter into a contract through an agent and such offer is acccepted from the time acceptance is communicated to the agent who is deemed authorized to receive the acceptance. Where an agent purchased property in bad faith, the principal should also be deemed a purchaser in bad faith. Notice to the agent is, to all legal intents and purposes, notice to the principal. 3. Purpose The purpose of agency is to extend the personality of the principal through the facility of the agent to render some service to do or something. It enables the activity of the man which is naturally limited in its excercise by the impositions of his physiological conditions to be legally extended by permitting him to be constructively present in many different places and to perform diverse juridical acts and carry on many different activities through another when physical presence is impossible or inadvisable at the same time. Parties to the Contract 1. Principal - One whom the agent represents and from whom he derives his authority; he is the person represented. - Agency imports the contemporaneous existence of a principal and there is no agency unless one is acting for and in behalf of another. 2. Agent - One who acts for and represents another; he is the person acting in a representative capacity. The agent has derivative authority in carrying out the principals business. He may employ his own agent in which case he becomes a principal with respect to the latter. -If an act done by one person in behalf of another is, in its essential nature, one of agency, the former is agent of the latter notwithstanding that he is not so called. Essential Elements of Agency 1. There is consent, express or implied, of the parties to establish the relationship; 2. The object is the execution of a juridical act in relation to third persons; 3. The agent acts as a representative and not for himself; and 4. The agent acts within the scope of his authority. In addition, the parties must be competent to act as principal and agent. Consideration is not required.

An agency relationship is consensual in nature. It is based on the concept that the parties mutually agree on its creation. A person may express his consent by contract, orally or in writing, by conduct, or by ratification, or the consent may arise by presumption or operation of law.

Relationship of Third party w/ Principal & Agent 1. Since an agents contract is not his own but his principals a third partys liability on such contract is to the principal and not to the agent, and liability to such third party is enforceable against the principal, not the agent. 2. Where an agency exists, the relationship of the third party with whom the agent has contracted to the principal, is the same as that in a contract in which there is no agent. a. Normally, the agent has neither rights nor liabilities as against the third party. He cannot sue or be sued on the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must generally be a party to said contract. - The legal situation is different where an agent is constituted as an assignee. In such a case, the agent may in his own behalf, sue on a contract made for his principal, as an assignee of such contract. b. The fact that the agent did not obtain his commissions or recoup his advances because of the non-performance of the contract does not entitle him to file an action against the buyer where he does not appear as a beneficiary of a stipulation pour atrui. c. An agent in his own behalf however, may bring an action founded on a contract made for his principal as an assignee of such contract. The rule requiring every action to be prosecuted in the name of the real partyin-interest recognizes the assignments of rights of action and also recognizes the assignments of rights and action and also recognizes that when one has a right assigned to him, he is then the real party-ininterest and may maintain an action on such claim or right. Capacity of the Parties 1. Principal - The principal must be capacitated or have the legal capacity to enter into contract in his own right. A person who cannot legally enter into contracts directly should not be permitted to do it indirectly through another. - The principal may either be a natural person or an artificial one. So legal entities such as corporations can be principals or agents. On the other hand, a voluntary association of persons which is not a legal entity has no legal existence and cannot sue or be sued; hence it has no capacity to appoint an agent. - During the existence of a state of war, an enemy alien may not appoint an agent to act in the belligerent territory with which his nation is at war. - Inasmuch as one who acts through an agent in law does the act himself, the capacity to act by an agent depends on the capacity of the principal to do the act himself if he were present. (331) 2. Agent - Anyone can be an agent. His capacity is usually immaterial. In case of the agent, since he assumes no personal liability, he does not have to possess full capacity to act for himself insofar as third persons are concerned. - An agent derives his authority from the principal and a contract made by the agent is legally viewed as a contract of the principal. - Thus, even one under legal disability (minor) whose contracts, therefore, are not binding upon him may nevertheless act as an agent and bind his principal although he cannot be a principal appointing an agent. - Where one knowingly permits another to act as his agent, the capacity of the latter will be conclusively presumed. However, some mental capacity is

necessary as an agent, who are absolutely incapacitated such as insane persons, cannot be agents as they are completely incapable of understanding the task to be performed. A person of sound mind not otherwise incapacitated may act as agent for another since his agreements bind only the principal. But in some instances, additional qualifications must exist, the lack of which may void the relationship which the alleged agent assumed (Attorney to represent a principal in legal matters) Insofar as his obligations to his principal are concerned, the agent must be competent to bind himself. The extent to which an agent is a fiduciary and is subject to duties and liabilities to his principal depends on his capacity.

Other names used to designate the parties The agent is frequently called an attorney, or an attorney-in-fact and occasionally is spoken of as a proxy, delegate, or representative. The person represented, though usually called the principal is sometimes called the employer, constituent or chief. Acts that may be/not be delegated to agents The general rule is that what a man may do in person, he may do thru another. So a stockholder may delegate to another his right to inspect the books of the corporation because this is an act which he can lawfully do personally. Some acts however, cannot be done through an agent. 1. 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 by the latter. - The right to vote during an election; Making of a will; Statements which are required to be made under oath; Attendance of board meetings by a member of the board of directors or trustees - An agent cannot delegate to a sub-agent the performance of acts which he has been appointed to perform in person. A re-delegation of the agency would be detrimental to the principal as the second agent has no privity of contract with the former. 2. 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. There can be no agency in the perpetration of a crime or an unlawful act. (335) Determination of existence of agency In most circumstances, no formalities are required for the creation of an agency relationship. The question of whether an agency has been created is ordinarily a question which may be established in the same way as any other fact, either by direct or circumstantial evidence. 1. Designation by the parties - This is not controlling. 2. Fact of existence - The question is to be determined by the fact that one represents and is acting for another, and not by the consideration that it will be inconvenient or unjust if he is not held to be the agent of such other; and if relations exist which will constitute an agency, it will be an agency whether the parties understood the exact nature of the relation or not. 3. Presumption of evidence - The relation of agency cannot be inferred from mere relationship or family ties unattended by conditions, act or conduct clearly implying an agency. For the relation to exist, there must be consent by both parties. 4. Intention to create relationship - On the part of the principal therefore must be either an actual intention to appoint or an intention naturally inferable from his words or actions and on the part of the agent, there must be an intention to

accept the appointment and act on it, and in the absence of such intent, there is generally no agency. - The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. - However if one professes to act as agent for another, he may be estopped to deny his agency both as against the asserted principal and the third persons interested in the transaction in which he is engaged. 5. As between principal and third person - As between them, agency may exist without the direct assent of the agent. Thus, by directing a third person to deal with another as agent, the principal necessarily authorizes the agent to act for him. - Neither is it necessary that the principal personally encounter the third person with whom the agentire acts. Precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent. Nature of relations between principal and agents 1. Relations fiduciary in character The relations of an agent to his principal are fiduciary in character since they are based on trust and confidence on a degree which varies considerably from situation to situation. 2. Agent estopped from asserting interest adverse to his principal In regard to property forming the subject matter of the agency, the agent is estopped from asserting or acquiring a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. However, an agent does not by accepting the agency, lose any prior claim which he himself may have to the property with which he deals, nor is he estopped to assert that money or property in his hands was not received by him as agent for the principal...(339) 3. Agent must not act as an adverse party In matters touching the agency, agents cannot act so as to bind their principals, where they have an adverse interest in themselves An egnt however, can buy for himself the property placed in his hands for sale or administration after the termination of the agency, or if the principal gives his consent thereto, or other properties different from those he has been commissioned to sell. If the principal authorizes the agent to sell goods, the agent must not sell to himself. His duty to get the highest price here conflicts with his interest to buy as cheaply as possible. But where it appears from the facts that the principal is interested in the receipt of a fixed price for the subject matter of the agency, he may sell to himself.

6. Agent must give notice of material facts Of which he has cognizance, which concern the transaction and subject matter of the agency. On failure to do so, the agent may be held liable for damages for any loss suffered or injury incurred as a result of such breach. The principal also owes the agent the duty to act with outmost good faith. He may not keep from the agent information that has any bearing on their agency relationship. Knowledge of agent imputed to principal The knowledge of the agent is imputed to the principal even though the agent never communicated such knowledge to the principal even though the agent never communicated such knowledge to the principal. The knowledge of the principal cannot be imputed to his agent. Exceptions to the rule 1. Where the agents interests are adverse to those of the principal 2. Where the agents duty is not to disclose the information as where he is informed by way of confidential information; and 3. Where the person claiming the benefit of the rule colludes with the agent to defraud the principal. Agents subject to principals control One person, the agent agrees to act under the control or direction of another-the principal. The extent of the principals control over the agents acts varies both with the type of the agency relationship and the facts of the particular case. The general rule is that the principal may direct the acts of his agent even though the principal has promised not to do so. The principal becomes liable in damages for breach of his promise not to give direction, but the agent cannot act in disregard of the principals demands. Agency and similar contracts or relations The important feature of an agency relationship which distinguishes it from similar contracts is the agents power to bring about business relations between his principal and third persons. General agents are to be distinguished from particular kinds of agents, whose authority is of a special and limited character in most respects. Distinguished from Partnership An agent acts only for his principal, a partner acts not only for his co-partners and the partnership but also as principal of himself. Agency Partnership Partners power to bind his Contro Agent must submit to the principal co-partner is not subject to l by a right to control, unless the there is an agreement to princi that effect pal Binds not only the firm Liabilit Assumes no personal liability where he acts members but himself as y of within scope of his well the authority agent Sharin When earned, the profits belong to all parties as common proprietors in agreed proportions, the g of profits relation is one of partnership, but if the alleged

4. Agent must not act for an adverse party An agent cannot serve two masters unless both consent or unless he is a mere middleman or intermediary with no independent initiative. An agent cannot act as such for both parties to the same transaction, in the presence of conflicting interests, unless he acts with the knowledge and consent of both, and on failure so to operate, either party may repudiate the transaction involved. 5. Agent must not use or disclose secret information Requirements of good faith and loyalty demand of the agent the duty not to use or divulge confidential information obtained in the course of his agency for his own benefit to the principals injury and expense. After the agency is terminated, the agent is no longer under a duty to abstain from competition and may then use general information as to business methods and names of customers (if not acquired in violation of his duty as agent) remembered but he must still not injuriously use or disclose confidential information entrusted to him only for the principals use or acquired by him in violation if his duty.

owner takes his share not as owner but as an agreed measure of compensation for his services or the like, the relation is one of agency.

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Kinds of Agency 1. As to manner of its creation a. Express b. Implied (such as in an agency by estoppel or implication c. Ratification 2. As to its character a. Gratuitous b. Compensated or Onerous 3. As to extent of business covered

a. General- All business of the principal b. Special- One or more specific transactions
4. As to authority conferred a. Couched in general terms- comprise only acts of administration b. Couched in specific terms- one authorizing only the performance of a specific act or acts 5. As to nature and effects a. Ostensible or representative- one where the agent acts in the name and representation of the principal b. Simple or commission- one where the agent acts in his own name but for the account of the principal Form of Agency (372) 1. When form is required for the validity of the contract 2. When required to make the contract effective against 3rd persons 3. When required for the purpose of proving the existence of a contract such as those provided in the Statute of Frauds In general, there are no formal requirements governing the appointment of an agent. It may even be implied from words and conduct of the parties and circumstances of the particular case Appointment of Agent It is not essential that an agent should be appointed directly the principal, but the appointment may be made through another. Presumption of Agency 1. General rule Agency is generally not presumed. The relation between principal and agent must exist as a fact. Where the relation of agency is dependent on the acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with the burden of proof resting on the person alleging the agency to show, not only the fact of its existence, but also its nature and extent 2. Exceptions A presumption of agency may arise in those few cases where an agency may arise by operation of law or to prevent just enrichment. Authority of Attorney to appear on behalf of his client (375)

1. Rule of strict construction As a general rule, it must be strictly be construed and strictly pursued. The instrument will be held to grant only those powers which are specified and defined, and the agent may neither go beyond nor deviate from the POA. 2. Qualification of the rule The rule is not absolute and should not be applied to the extent of destroying the very purpose of the power. Even if there are repugnant clauses in a POA, they should be reconciled, if possible, so as to give effect to the instrument in keeping with its general intent. Furthermore, the instrument should always be deemed to give such powers as are essential or usual and reasonably necessary and proper in effectuating the express powers. (380)

#1872
Acceptance between persons absent If both the principal and the agent are absent, acceptance of the agency by the agent is not implied from his silence or inaction. Since the agent is not bound to accept the agency, he can simply ignore the offer. However in the two cases, agency is implied. There is implied acceptance if the agent writes a letter acknowledging receipt of the POA but offers no objection to the creation of the agency. But his mere failure to give a reply does not mean that the agency has been accepted unless the POA is with respect to the business in which he is habitually engaged as an agent or the acceptance could be inferred from his acts which carry out the agency as when he begins to act under the authority conferred upon him. Under #1872, the principal transmits the POA to the agent. In #1871, he personally delivers the POA to the agent

#1873

Communication of Existence of Agency Two ways of giving notice of agency with different effects: 1. If by special information (by letter), the person appointed as agent is considered such w/ respect to the person to whom it was given 2. If by public ad, the agent is considered as such /regard to any person. It does not need to be in any form. Manner of Revocation of Agency The POA must be revoked in the same manner in which it was given. 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. If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Nevertheless, revocation made in any manner is effective where the person dealing with the agent has actual knowledge thereof; otherwise, bad faith and fraud would be committed. Estoppel to deny agency 1. Estoppel of agent One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in wc he engaged 2. Estoppel of principal a. As to agent- one who knows that another is acting as his agent and fails to repudiate his acts, or accepts the benefits of them, will be estopped to deny the agency as against such other b. As to sub-agent to estop the principal from denying his liability to a third person, he must have known or be charged with knowledge of the fact of the

#1870
Form of Acceptance by Agent Since agency is a contract, there must be consent by both parties. An agency is either express or implied, this is true on the part of the principal as well on that of the agent. It does not depend on express appointment and acceptance.

#1871
Acceptance between persons present The law distinguishes between cases (1) where persons are present & (2) where persons are absent. The agency is impliedly if the agent receives a power of attorney from the principal himself personally without any objection, both being present. Definition and purpose of a Power of Attorney It is an instrument in writing by which one person appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. Its primary purpose is not to define the authority of the agent as between himself and his principal but to evidence the authority of the agent to third parties within whom the agent deals; and the person holding a power of attorney is shown and designated as an attorney-in-fact, thus distinguishing such person from an attorney-at-law, a lawyer. Construction of Power of Attorney

transaction and the terms of the agreement between the agent and sub-agent. c. As to third persons- one who knows that another is acting as his agent or permitted another to appear as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith is estopped to deny the agency. 3. Estoppel of third persons A third person, having dealt with one as agent may be estopped to deny the agency as against the principal, agent, or third persons in interest. He will not however, be estopped where he has withdrawn from the contract made with the unauthorized agent before receiving any benefits thereunder. 4. Estoppel of the government The government is neither estopped by the mistake or error on the part of its agents. But it may be estopped through affirmative acts of its officers acting within the scope of their authority. Agency by estoppel & Implied agency distinguished Agency by Estoppel Implied Agency Existen There is no agency at all, but There is an actual the one assuming to act as agency as mush as ce of agent has apparent or if it were created actual ostensible, although not real, by express words. agency Relianc e by third person s Nature of authori ty
authority to represent another. Can be invoked only by a third person who in good faith relied on the conduct of the principal in holding agent out as being authorized. Principal liable. An apparent agent is no agent at all, and as against the principal, has none of the rights of an agent, except where the principals conduct or representations are such that the agent reasonably believed that the principal intended him to act as agent in the matter. Agency should be restricted to cases in which the authority is not real but apparent.

Necessity of Compensation The relation of principal and agent can be created although the agent receives no compensation. A person who agrees to act as an agent without compensation is a gratuitous agent. Ordinarily, the promise of a gratuitous agent to perform is not enforceable. He is however, bound by his acceptance to carry out the agency. The fact that he is acting without compensation has no effect upon his rights and duties with reference to the principal and to third parties. However, the circumstance that the agency was for compensation or not shall be considered by the court in determining the extent of liability of an agent for fraud or negligence. The principal is liable for the damage to third persons caused by the torts of the gratuitous agent whose services he accepted. Liability of principal to pay compensation 1. Amount- The principal must pay the agent of the compensation agreed upon, or the reasonable value of the agents services if no compensation was specified. 2. Compliance by agent with his obligations- The liability of the principal to pay commission presupposes that the agent has complied with his obligation as such to the principal. (394) 3. Procurring cause of the transaction- The agent must prove that he was the guiding cause for the transaction or as has been said, the procuring cause thereof, depending on the facts of the particular case; otherwise he is not entitled to the stipulated brokers commission. The term procuring cause refers to a cause originating a series of events which without break in their continuity, result in the accomplishment of the prime objective of the employment of the broker-producing a purchaser ready, willing and able to buy on the owners terms. 4. Evasion of commission in bad faith 5. Compensation contingent on profits 6. Reduction by principal of overprice 7. Commission payable by owner of property sold 8. Grant of compensation on equitable ground. 9. Right of agents companion to compensation. 10. Termination of agency contract 11. Validity of exclusive sales agency agreement 12. Sale through another agent Right of Agent to compensation in case of double agency 1. With knowledge of both principals Such agency is disapproved of by law unless the agent acted with full knowledge and consent of both principals, or unless his employment was merely to bring the parties together. (400) 2. Without knowledge of both principals In case of such double employment, the agent can recover from neither, where his employment by either is concealed from or not assented to by the other. (401) 3. With knowledge of one principal If the second employer has knowledge of the first engagement, then both he and the agent are guilty of the wrong committed against the first employer, and the law will not enforce an executory contract entered into in fraud of the rights of the first employer. The contract itself is void as public policy and good morals and both parties thereto beingin pari in delicto, the law will leave them as it finds them. Factors in fixing the amount of attorneys fees (401)

The principal alone is liable. Such reliance is not necessary since the agent is a real agent. The principal is equally liable. An agent by implied appointment is a real agent with all thr rights and liabilities; he has actual authority to act on behalf of the principal. -Implied agency is a fact to be proved by deductions from other facts.

If the estoppel is on the ground of negligence or fraud

on the part of the principal, the agency is allowed upon the theory that, when one of two innocent persons must suffer loss, the loss should fall upon him whose conduct brought about the situation. (387)

#1874

Sale of land through agent As a general rule, the agents authority may be oral or written. An agency to sell on commission basis does not belong to any of the categories of contracts for which the law requires certain formalities; hence, it is valid and enforceable in whatever form it may be entered into. Under this article, the sale of a piece of land (not any other real estate) or any interest thereon, like usufruct, mortgage, etc. through am agent is void unless the authority of the agent to sell is in writing. It should however be considered as merely voidbale since the sale can be ratified by the principal such as by availing himself of the benefits derived from the contract (389) An oral agreement for the sale of real property or of an interest therein is unenforceable even if there is no agent.

#1875

Agency presumed to be with Compensation The agent does not have to prove that the agency is for compensation. The prima facie presumption that the agency is for a compensation may be contradicted by contrary evidence. (391)

#1876
Classes & Kinds of Agents 1. According to the manner in which the agency is created a. Express b. Implied

2. a. b. 3.

a.

b.

c.

According to their authority in fact Actual Ostensible According to the Nature & Extent of their Authority Universal- is one employed to do all acts that the principal may personally do, and which he can lawfully delegate to another the power of doing. May be viewed as an unlimited general agent. General- is one employed to transact all the business of his principal, or all business of a particular kind or place, or in other words, to do all acts connected with a particular trade, business, or employment. He has authority to do all acts connected with or necessary to accomplish a certain job. (Manager of a store) Special/Particular- is one authorized to act in one or more specific transactions, or to do one or more specific acts, or to act on a particular occassion. He has no authority to act in matters other than that for which he has been employed. His authority is to do only a particular act or a series of acts of a very limited scope. He has less power than a general agent (W/authority sell house)

ion of authority

by the mere revocation of his authority without notice to the third party

Construc tion of instructi ons of principal

Special Types of Agents 1. Attorney at law 2. Auctioneer 3. Broker- or one 4. Factor- one whose business is to receive and sell goods for a commission, being entrusted with the possession of the goods involved in the transaction 5. Cashier in bank- one whose business is to represent a banking institution in its financial transactions 6. Attorney-in-fact- is one who is given authority by his principal to do a particular act not of a legal character

Statement by the principal with respect to formers authority would ordinarily be regarded as advisory in nature only. This does not import unqualified authority and the implied power of any agent, must be limited to such acts as are proper for an agent to do, and cannot extend to acts clearly adverse to the interests of the principal, or for the benefit of the agent personally; and an agent has no implied authority to do acts not usually done by agents in that sort of business. The most general authority is limited to the business for which the agency is created.

to inquire makes termination of the relationship as between the principal and agent effective as to such third party unless the agency has been entrusted for the purpose of contracting with such third party They would be regarded as words limiting the authority of the agent. The authority of a special agent must be strictly pursued. Persons dealing with him must at their peril inquire into the nature & extent of his authority.

#1877
Agency couched in general terms It may be a general agency of a special agency. It includes only acts of administration and an express power is necessary to perform any act of strict ownership, even if the principal states that (1) he witholds no power, or that (2) the agent may execute such acts as he may consider appropriate, or that (3) he authorizes a general or unlimited (408) Meaning of acts of administration Presumed to include all the necessary & usual means to carry out the agency into effect Construction of contracts of agency (412)

Distinctions between a general agent & special agent General Agent Special Agent Is usually authorized Is authorized to do only Scope of one or more specific Authority to do all acts
connected with the business or employment in which the principal is engaged

Continuo us nature of service authorize d Extent to which agent may bind principal Knowled ge/disclo sure of limitatio ns of power

Is one who is authorized to conduct a series of transactions over time involving a continuity of service May bind his principal by an act within the scope of his authority although it may be contrary to his special instructions

Terminat

Is in its nature continuing and unrestricted by limitations other than those which continue the authority within the bounds of what is usual, proper and necessary under like circumstances. If there are other limitations, the principal must disclose them The expertise of the agent or the amount of discretion given to him is not relevant in making a distinction The apparent authority The duty imposed created does not terminate on the third party

acts in pursuance of particular instructions or with restrictions necessarily implied form the act to be done (405) Is one authorized to conduct a single transaction or a series of transactions not involving continuity of service and a relatively limited period of time (406) Cannot bind his principal in a manner beyond or outside his specific acts which he is authorized to perform on behalf of the principal Is in its nature temporary and naturally suggests limitations of power of which third persons must informs themselves

#1878
When special powers are necessary These cases are general acts of strict dominion or ownership as distinguished from acts of administration. Hence a special POA is necessary for their execution through an agent (414) To make payment Payment is the delivery of money or the performance in any other manner of an obligation, It is an act of ownership because it involves the conveyance of ownership of money/property. But when payment is made in the ordinary course of management, it is considered a mere act of administration. It is included in an agency couched in general terms. So no special POA is needed. Thus, a special power to make payment is implied from the authority to buy a designated piece of land at a certain price. To effect novation Novation is the extinction of an obligation through the creation of a new one which substitutes it by changing the object or principal conditions thereof, substituting a debtor or subrogating another in the right of the creditor. The obligations must already be in existence at the time the agency was constituted. To compromise, etc.

Compromise is a contract whereby the parties by making reciprocal concessions, avoid a litigation or put an end to one already commenced. A compromise must be strictly construed. The grant of special power regarding one of the acts is not enough to authorize the others. A judgement based on a compromise entered into by an atty without specific authority from the client is null and void.

The power to create a contract of suretyship cannot be inferred; it must be expressed. (422)

To waive an obligation gratuitously This is a condonation or remission. The agent cannot waive a right belonging to the principal without valuable consideration or even for a nominal consideration. He cannot bind the principal who is the obligee unless especially authorized to do so. A waiver may not be inferred when the terms thereof do not clearly prove an intent to abandon the right. To convey or acquire immovable This applies whether the contract is gratuitous or onerous. It refers only to immovables. Nos. 5 & 12 refer to sales made by an agent for a principal and not to sales made by the owner personally to another, whether that other be acting personally of through a representative (417) To make gifts Gift or donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it. An agent without special power from the principal cannot make gifts. But the making of customary gifts for charity or those made to employees in the business managed by the agent, are considered acts of administration To loan or borrow money The borrower is bound to pay to the creditor an equal amount of the same kind and quality. The creditor should require the execution of a POA in order that one may be understood to have granted another the authority to borrow on behalf of the former. Authority to borrow money is rarely inferred unless such borrowing is usually incident to the performance of acts which the agent is authorized to perform for the principal. (419) To lease realty for more than one year The lessor gives to the lessee the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. This does not refer to lease of real property from another person and to lease of personal property (421) To bind the principal to render service gratuitously The agent may by contract, bind himself to render service without compensation. However, to bind the principal to that effect, a special power is necessary. If the service is for compensation, the power may be implied. To bind the principal in a Contract of Partnership The partners bind themselves to contribute money, property or industry to a common fund with the intention of dividing the profits among themselves. The contract of partnership thus creates obligations the fulfillment of which requires an act of strict ownership. Furthermore, the principal must personally have trust and confidence in the proposed partners. To obligate principal as guarantor or surety The guarantor binds himself to fulfill the obligation of the principal debtor in case the latter should fail to do so. If the person binds himself solidarily, he is a surety, and the contract is called a suretyship.

To create or convey real rights over immovable property An agent cannot create or convey real rights like mortgage, usufruct, easement over immovable property belonging to his principal without special power. That is an act of strict ownership. There is no principle of law by which a person can become liable on a real estate mortgage which he never executed either in person or by attorney-infact. To accept or repudiate an inheritance A person having the free disposal of his property may accept or repudiate an inheritance. This act is one of strict dominion; hence, the necessity of special authority. To ratify obligations contracted before the agency An agent cannot effect novation of obligations existing at the time of constitution of the agency unless he be specially authorized to do so. He cannot ratify or recognize obligations contracted before the agency without special power from the principal. Any other act of strict dominion Generally, a sale or purchase of personal property is an act of strict dominion. Hence, a special power is necessary in order that the act shall be binding on the principal. (423)

#1879
Scope of authority to sell/mortgage The agent cannot sell or mortagge the property belonging to the principal without special power. An authority to sell the principals property does not carry with it or imply the authority to mortageg. And vice versa, the power to sell is not to be implied form the special power to mortgage, much less can it be construed to include an authority to represent the principal in any litigation. In the absence of express authorization, authority to sell contemplates the sale for cash and not for credit. Unless otherwise agreed, authority to buy or sell does not include authority to rescind or modify the terms of the sale after its completion, nor to act further with reference to the subject matter except to undo fraud or to correct mistakes (425) Contract giving agent exclusive authority to sell The appointment of a person as exclusive agent to sell specified property is not equivalent to giving the agent an exclusive power of sale. In the former case, the principal may endeavor to sell through his own efforts; in the latter, he may not so compete with the agent. But if the principal appoints a person as exclusive agent to sell the principals products in a specified territory, the principal may not compete with the agent in that territory, either personally or by other agents, or appoint another selling agent to sell his products. An exclusive agency will not be created by implication where the words of contract do not naturally import such a meaning. An agency contract to have the effect of giving the agent an exclusive territory which the principal may not invade to make sales, must sufficiently designate the territory within which the agent is to have exclusive rights Contract giving agent exclusive authority of sale This means exclusive agency to sell0the idea being the owner shall employ no other agent and that the broker shall have the only grant of power to sell that the owner will execute. Hence the words may be construed to be an inhibition upon the owner to grant to any one elese

the power to sell, rather an inhibition upon his right to sell. Power to revoke & Right to revoke brokers authority distinguished The principal always has the power to revoke but not having the right to do so in those cases wherein he has agreed not to excercise his power during a certain period. If in the latter case he does excercise his power, he must respond in damages (426)

He is liable if he breaches his contractual or any other duty to the agent. So that the principal may be bound by the act of the agent as to third persons and as to the agent himself... a. The agent must act within the scope of his authority. b. The agent must act in behalf of the principal The principal is bound by either actual or apparent authority of the agent. Under the doctrine of apparent authority (estoppel), the principal is liable only as to third persons who have been led reasonably to believe by the conduct of the principal that such actual authority exists, although none has been given. A person who is in fact not an agent may make a contract on behalf of another, or he is an agent but he has exceeded his powers. If the principal subsequently approves or affirms the contract, an agency relationship is created by ratification, and neither the principal nor the third person can set up the fact that the agent has no authority or exceeded his powers. When a person not bound by act of another 1. The latter acts without or beyond the scope of his authority in the formers name; and 2. The latter acts within the scope of his authority but in his own name, except when the transaction involves things belonging to the principal. One who acts in his own behald without authority from another, or in the name of a non-existent principal, naturally binds himself alone. He cannot be considered an agent for any purpose, since there must be a principal in order to have an agent. Unauthorized acts in the name of another unenforceable An agent acting for a principal ordinarily incurs no personal liability if he acts in a proper fashion. If the agent acts without authority or in excess or beyond the scope of his authority, there is no representation. Such act is unauthorized and therefore unenforceable WON the party with whom the agent contracted was aware of the limits of the agents power, unless the principal ratifies the transaction before it is revoked by the other contracting party or is estoppel to deny the agents authority. Where acts in excess of authority more advantageous to principal The agent is not deemed to have exceeded the limits of his authority should he perform the agency in a manner more advantageous to the principal than that indicated by him since he is authorized to do such acts as may be conducive to the accomplishment of the purpose of the agency (435) Liability of principal/agent for acts of agent Beyond his authority or power 1. Principal- as a general rule, the principal is not bound by the acts of an agent beyond his limited powers. Third persons dealing with an agent do so at their risk and are bound to inquire the scope of his powers. This admits of four qualifications: a. Where his acts have contributed to deceive a person in good faith b. Where the limitations on the power created by him could not have been known by the third person c. Where the principal has placed in the hands of the agent instruments signed by him in blank d. Where the principal has ratified the acts of the agent

#1880
Scope of special power to compromise/ to submit to arbitration The authority of the agent to compromise includes by implication the power to do whatever things are usual and necessary which the principal himself can do to effectuate such compromise. But he is not thereby authorized to submit to arbitration because while the principal may have confidence in the agents judgement, the arbitrator designated may not possess the trust of the principal. The authority to submit to arbitration does not include the power to compromise. The principal may not have trust in the agents judgement in making a settlement.

#1881, #1882
Authority of an agent defined Authority is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principals manifestation of consent to him. The authority of the agent is the very essence-the sine qua non-of the principal and agent relationship. This authority unless it is otherwise agreed, includes only authority to act for the benefit of the principal, and the source of the authority is always the principal and never the agent. Authority distinguished from power Authority Power The source or cause The effect As to existen -So an agent granted authority by the principal has thereby the pwer to act for which, which means an ce

As to scope

ability on the part of the agent to produce a change in a given legal relation, by doing and not doing a given act - The extent of the agents authority depends on the purpose of the agency. - As between an agent and a principal, an act is within the authority of the agent if it is not aviolation of his duty to the principal, and it is within his power if he has the legal ability to bind the principal to a third person although the act constitutes a violation of his duty to the principal. -In fine, an agent with authority to do an act has also the power to bind the principal, but the latter may exist without the former. -So far as third persons are concerned, no distinction exists. An act within the power of the agent is deemed within the scope of his authority even if the agent has in fact exceeded the limits of his authority, or he has no authority whatever to do, in the ff cases (429) - It is to authority that we must look to in determining the (a) nature of the relationship and (b) the agents ability normally to subject his principal to liability in contract.

Kinds of authority An agent cannot act in behalf of the principal in any way he sees fit. He can make the principal legally responsible only when he is authorized by the principal to act the way he did. (431) 1. Actual 2. Express 3. Implied 4. Apparent or ostensible 5. General 6. Special 7. Authority be necessity or by Operation of Law When principal bound by act of agent

2. Agent- the agent who exceeds his authority is

c.

present, then the agents liability is to the third party. If the agent personally assumes responsibility for the particular transaction, if the principal defaults he, in effect also becomes obligated as a co-principal

Action must brought by and against principal When the principal is bound by the act of the agent, the action must be brought against the principal, not against the agent. The bringing of the action against the agent cannot have any legal effect except that of notifying the agent of the claim. Beyond such notification, the filing of the action can serve no other purpose.

An agen acting in his own name does not bind the principal is when the contract involves things belonging to the principal. In such case, the contract is necessary for the protection of third persons against possible collusion between the agent and the principal. It applies only when the agent has in fact been authorized by the principal to enter into the particular transaction, but the agent instead of contracting for and in behalf of the principal, acts in his own name. The agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. The agents apparent representation yields to the principals true representation and that, the contract must be considered as entered into between the principal and the thiird person. If the onligations belong to the former, to him alone must also belong the rights arising from the contract.

3. Remedy of principal - The principals right to demand from the agent damages for his failure to comply with the agency.

#1883
Kinds of principal 1. Disclosed principal - If at the time of the transaction contracted by the agent, the other party thereto has known that the agent is acting for a principal and of the principals identity. This is the usual type of agency. 2. Partially disclosed principal - If the other party knows or has reason to know that the agent is or may be acting for a principal but is unaware of the principals identity. - The partially disclosed principal may enforce against the third person the contract of the agent like any disclosed principal. - The third person has a right of action against the principal. The liability of the third party and the principal, except that the agent is also liable to the third party, unless they agree otherwise. 3. Undisclosed principal - If the party has no notice of the fact that the agent is acting as such for a principal. - If a person purports to act for a non-existent principal, obviously he is liable to the party with whom he contracted. Since there is no principal, there is no agent at all; the person merely claims to be one. Agency with undisclosed principal In order that an agent may bind his principal, he must act on behalf of the latter and within the scope of his authority. 1. General Rule - The agent is the one directly liable to the person with whom he had contracted as if the transaction were his own. - The reason for the rule is that there is no representation of the principal when the agent acts in his own name. In effect the resulting contractual relation is only between the agent and the third person. Therefore, the principal cannot have a right of action against the third person nor the third person against him. - The third person cannot allege that he was misled by any representation of the agent since he did not know of the existence of the undisclosed principal. - An agent who enters into a contract in his own name without disclosing the identity of his principal renders himself personally liable even though the third person knows that he is acting as an agent, unless it affirmatirvely appears that it was the mutual intention of the parties to the contract that the agent should not be bound. 2. Exception

4. Remedy of third person - When the agent acts in his own name, he is not personally liable to the person with whom he enters into a contract when things belonging to the principal are the subject thereof, yet such third person has a right of action not only against the principal but also against the agent, when the rights and obligations which are the subject matter of the litiagtion cannot be legally and juridically determined without hearing both of them (441)