AGENCY Final Reviewer Chapter 1. Nature, Form and Kinds of Agency

Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

Agency: A relationship which implies a power in an agent to contract with a 3rd person on behalf of a principal.Kind of Contract: It is a preparatory contract. It is a contract entered not for its own end but to be able to enter into other contracts.

Characteristics:1. Consensual: perfected by mere consent; 2. Nominate: it has its own name; 3. Principal: does not depend on another contract for its existence and validity; 4. Preparatory: entered into as a means to an end; 5. Unilateral/Bilateral: a. Unilateral: if contract is gratuitous, it creates obligations for only one of the parties, i.e. agent. b. Bilateral: if for compensation, it gives rise to reciprocal rights and obligs. Basis: Representation. 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 the principal personally did them.

Distinguishing Features:

1.) Representative character; and 2.) Derivative authority.

Purpose: To extend the personality of the principal through the facility of the agent.

Parties:

1.) Principal; and 2.) Agent. Who can be principal? The principal may be a natural person or a juridical person. He must be capacitated. The rule is if a person is capacitated to act for himself or in his own right, he can act through an agent. Must the agent have capacity? Insofar as 3rd persons are concerned, it is enough that the principal is capacitated; but insofar as his obligations to his principal are concerned, the agent must be able to bind himself.

Essential Elements of Agency: 1.) Consent, express or implied; 2.) Object of the contract is the execution of a juridical act in relation to 3rd persons;3.) The agent acts as a representative and not for himself;4.) The agent acts within the scope of his authority. Acts that cannot be done through an agent:

1.) Personal acts: if personal performance is reqd by law or public policy or agreement;

2.) Criminal or illegal acts: attempt to delegate another authority to do an act which, if done by the principal would be illegal, is void. Nature of Relation between Principal and Agent: Fiduciary, based on trust and confidence.Agency v. Lease of Work or Service

AgencyLease of Work/Service

Basis is representation. Basis is employment

Agent exercises discretionary powers.Lessor only performs ministerial functions.

3 persons are involved: principal, agent & 3rd person.Only 2 persons involved: lessor and lessee

Commercial or business transactions.. Matters of mere manual or mechanical execution.

Agency v. Guardianship

Agency Guardianship

Agent represents a capacitated person.Guardian represents an incapacitated person.

Agent appointed by principal and can be removed by himGuardian appointed by court and stands in loco parentis.

Agent subject to directions of principal.. Guardian not subject to directions of ward but must act for his benefit.

Agent can make principal personally liableGuardian has no power to impose personal liability on his ward.

Agency to Sell v. Sale Agency to Sell Sale

Agent receives the goods as the goods of the principalBuyer receives the goods as owner.

Agent delivers proceeds of the sale.Buyer pays the price.

Agent can return object in case he is unable to sell to a 3rd person.Generally, buyer cannot return the object sold.

Agent in dealing with the thing received is bound to act accdg to the instructions of his principalBuyer can deal with the thing as he pleases, being the owner.

Agent v. Independent Contractor

Agent Independent Contractor

Represents the principalEmployed by employer

Acts under the control and instructions of the principalActs according to his own method.

Principal liable for torts committed by agent w/in scope of authority.Employer not liable for torts committed by independent contractor.

Art. 1869. Agency must be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may be oral, unless the law requires a specific form. Classifications of Agency: as to1.) Manner of Creation: a. Express: actually authorized, either orally or in writing. b. Implied: implied from acts of principal, from his silence or lack of action or his failure to repudiate the agency knowing that another person is acting on his behalf w/o authority.2.) Character: a. Gratuitous: agent receives no compensation for his services.b. Onerous: agent does receive compensation. 3.) Extent of business covered:

a. General: comprises all the business of the principal. b. Special: comprises one or more specific transactions. 4.) Authority conferred:a. Couched in general terms: deemed to comprise only acts of administration.b. Couched in specific terms: authorizes only the performance of a specific act/s. 5.) Nature and effects: a. Representative: agent acts in name and representation of principal. b. Simple/Commission: agent acts in his own name but for the account of the principal. Can agency be presumed? Generally NO because the relationship between the principal and agent must exist as a fact. The only exceptions to this rule are when agency arises by operation of law or agency is presumed to prevent unjust enrichment.

Form: Generally, NO formal requirements. Agents authority may be oral or written, it may be in public or private writings. The only exception is when the law requires a specific form (e.g. sale of real property or any interest therein by an agent.)

Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances.

Form of Acceptance by Agent: Acceptance may be express or implied; express when it is oral or written; implied when it can be inferred from the acts of the agent which carry out the agency, or from his silence or inaction accdg to the circumstances.

Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. Between 2 persons who are present, when it acceptance deemed implied? When the agent receives a power of atty from the principal himself personally without objection. Is this presumption conclusive? NO, it can be rebutted by contrary proof.

Power of attorney: An instrument in writing by which one person, as principal, 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 to evidence the authority of the agent to 3rd parties w/ whom the agent deals. Construction: A power of atty is strictly construed and strictly pursued. The instrument will be held to grant only those powers which are specified, and the agent may neither go beyond nor deviate from the power of atty. The only exception is when strict construction will destroy the very purpose of the power. Meaning of present Not limited to face-to-face encounters. 2 persons conversing on the phone are also considered as both present.

Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except:1.) When the principal transmits his power of attorney to the agent, who receives it without any objection;2.) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram.

2 Ways of Giving Notice of Agency1.) By special information; or 2.) By public advertisement. Effects: 1.) Special information: the person appointed as agent is considered such with respect to the person to whom it was given. 2.) Public advertisement: Agent is considered such with regard to any person. Revocation An agency is revoked in the same manner as it was given. General rule: Special information needs special information of revocation. Except: if you can prove that the 3rd person read the notice in the newspaper.

Art. 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given.

Agency by Estoppel: There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another. 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 3rd persons interested in the transaction in which he is 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 accept 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 3rd person, he must have known or be charged with knowledge of the fact of the transmission and the terms of the agreement between the agent and sub- agent. c.) As to 3rd persons One who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of 3rd persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency.3.) Estoppel of 3rd Persons A 3rd person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or 3rd persons in interest. 4.) Estoppel of the govt The govt 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.

Art. 1874. 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.

A letter is sufficient [Jimenez v. Rabot].

Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. Broker: One who in behalf of others, and for compensation or fee, negotiate contracts relative to property. He is the negotiator between the parties, never acting in his own name, but in the name of those who employ him. He is strictly a middleman and for some purposes, the agent of both parties. When is a broker entitled to compensation? A broker is entitled to commission whenever he rings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. A broker is never entitled to commission for unsuccessful efforts.

Does the law allow double agency? Such agency is disapproved by law for being against public policy and sound morality. The exception is where the agent acted with full knowledge and free consent of the principals.

In case the agent assumes a double agency, what is his right to compensation? 1.) If with knowledge of both principals recovery can be had from both.2.) If without knowledge of both agent can recover from neither. 3.) If with knowledge of only one as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public policy and good morals. Art. 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more specific transactions.

Classification of Agents:1.) Universal agent: One employed to do all acts that the principal may personally do, and which the principal can lawfully delegate to another the power of doing. 2.) General agent: One employed to transact all the business of his principal, or all business of a particular kind or in a particular place, or in other words, to do all acts connected with a particular trade, business, or employment.3.) Special/Particular agent: One authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion. e.g.:

Atty at law: One whose business is to represent clients in legal proceedings. Auctioneer: One whose business is to sell property for others to the highest bidder at a public sale. Broker: One whose business is to act as intermediary between 2 other parties. 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.

Attorney-in-fact: One who is given authority by his principal to do a particular act not of a legal character. In strict legal sense: An agent having a special authority created by deed. General Agent v. Special Agent [SNETI] As toGeneral agentSpecial agent

Scope of authority

All acts connected w/ the business in which he is engagedOnly one or more specific acts in pursuance of particular instructions or w/ restrictions necessarily implied from the act to be done.

Nature of service authorized

Series a transactions involving a continuity of service.

Single transaction or a series of transactions not involving continuity of service.

Extent to which agent may bind principal

By an act within the scope of his authority although it may be contrary to his special instructions.

Cannot in a manner beyond or outside the specific acts w/c he is authorized to perform.

Termination of authority

Apparent authority does not terminate by mere revocation of authority w/o notice to 3rd parties.

Termination effective as to 3rd party unless agency was for purpose of contracting w/ that 3rd party.

Construction of instructions of principal

Merely advisory.Strictly construed. Limits the authority of agent.

Art. 1877. An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general or unlimited management.

Examples of acts of mere administration:1.) To sue for collection of debts;2.) To employ workers or servants and employees needed for the conduct of business;3.) To engage counsel to preserve the ownership and possession of the principals property; 4.) To lease real property to another person for 1 year or less, provided the lease is not registered; 5.) To make customary gifts for charity or to employees in the business managed by the agent6.) To borrow money if it be urgent and indispensable for the preservation of the things under administration. How are contracts of agency construed? Contracts of agency as well as general powers of attorney must be interpreted in accordance with the language used by the parties. The real intention of the parties is primarily determined from the language used and gathered from the whole instrument. In case of doubt, resort must be had to the situation, surroundings and relations of the parties. The intention of the parties must be sustained rather than defeated. So if the contract be open to 2 constructions, one of which would uphold the intention while the other would overthrow it, the former is to be chosen.

MEMORIZE THIS: [PNC-WIGLLS-PG-CARS] Art. 1878. Special powers of attorney are necessary in the following cases: 1.) To make such payments as are not usually considered as acts of administration; 2.) To effect novations which put an end to obligations already in existence at the time the agency was constituted; 3.) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; 4.) To waive any obligation gratuitously; 5.) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; 6.) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; 7.) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; 8.) To lease any real property to another person for more than one year;9.) To bind the principal to render some service without compensation; 10.) To bind the principal in a contract of partnership; 11.) To obligate the principal as a guarantor or surety; 12.) To create or convey real rights over immovable property; 13.) To accept or repudiate an inheritance; 14.) To ratify or recognize obligations contracted before the agency; 15.) Any other act of strict dominion.

Scope of General Authority to Purchase: Where an agents power to purchase is general and unrestricted, he has implied authority to do whatever is usual and necessary in the exercise of such power. He may: 1.) Determine the usual and necessary details of the contract, 2.) agree upon the price,3.) modify or rescind the contract of purchase, 4.) accept delivery for his principal, 5.) give directions for the delivery of the property purchased, and 6.) may borrow money to pay for the care and preservation of the property purchased.

But he has no special power to : 1.) Settle a contest between the principal and a 3rd person regarding the ownership of goods purchased, or2.) Agree to an account stated, or3.) Do anything not usual or necessary to the exercise of such authority. Scope of Special Authority to Purchase: Where the agency is a special one, or is restricted to purchases upon certain terms and conditions, the agent has no authority to:1.) Purchase upon different terms and conditions from those authorized, or2.) Modify or rescind a contract of purchase made by the principal.

Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell.

The ff are included in a Power to Sell: The power to: 1.) Find a purchaser or to sell directly;2.) Deliver the property; 3.) Make the usual representation and warranty;4.) Execute the necessary transfer documents; 5.) Fix the terms of the sale unless there be set conditions stipulated by the principal;

6.) Sell only for cash;7.) Receive the price unless he was authorized only to solicit orders.

The ff are not included in a Power to Mortgage The power to: 1.) Sell; `

2.) Execute a 2nd mortgage; 3.) Mortgage for the agents personal benefit or for the benefit of any 3rd person, unless the contrary has been clearly indicated.

Does the principal have the power to revoke a contract giving an agent exclusive authority to sell? YES. But he may not have the right to use such power if he has agreed not to exercise such power during a certain period. In case he fails to comply with this obligation-not-to-do, he will be liable for damages.

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

Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latters judgment and discretion to protect the formers rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal.

What happens if the agent is specifically authorized to submit to arbitration? Then the arbitration award binds the principal, provided, of course, that the agent acted within the scope of his authority.

Art. 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. Authority: 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 sine qua non of the principal and agent relationship. This authority, unless it is otherwise agreed, includes only the authority to act for the benefit of the principal, and the source of the authority is the principal and never the agent. Kinds of Authority: 1.) Actual: when it is actually granted, and it may be express or implied. It results from what the principal indicates to the agent. 2.) Express: when it is directly conferred by words. 3.) Implied: when it is incidental to the transaction or reasonably necessary to accomplish the purpose of the agency, and therefore, the principal is deemed to have actually intended the agent to possess. 4.) Apparent or Ostensible: when it is conferred by words, conduct or even by the silence of the principal which causes a 3rd person reasonably to believe that a particular person, who may or may not be the principals agent, has actual authority to act for the principal. Ostensible authority is another name for authority by estoppel. 5.) General: when it refers to all the business of the principal. 6.) Special: when it is limited only to one or more specific transactions. 7.) By necessity or by operation of law: when it is demanded by virtue of the existence of an emergency; it terminates when the emergency has passed.

Requisites for Principal to be Bound by Act of Agent: 1.) The agent must act in behalf of the principal; 2.) The agent must act within the scope of his authority.

When is a principal not bound by the act of his agent? When the agent acts without or beyond the scope of his authority; or when the agent acts within the scope of his authority but in his own name except when the transaction involves things belonging to the principal.

Authority? Whose behalf?Status of

With authorityPrincipalsValid

With authorityOwnDepends[1883]

Without PrincipalsUnenforceable

WithoutOwnValid

Who to sue? In case the agent acts in the name of the principal and within his scope of authority, you must name the principal as the defendant.

Note: The authority to look for buyers does not carry with it the authority to sell.

Art. 1882. The limits of the agents authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him.

What happens if the agent exceeds his authority but he performs the agency in a manner more advantageous to the principal? It will exist as if he did not exceed the limits of his authority since he must do such acts as may be conducive to the accomplishment of the purpose of the agency.

Test: Would the principal enter into this transaction?

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. Kinds of Principals: 1.) Disclosed: 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 has known the principals identity. 2.) Partially disclosed: 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 3rd person the contract of the agent like any disclosed principal. Similarly, the 3rd person has a right of action against the principal. 3.) Undisclosed: if the party has no notice of the fact that the agent is acting as such for a principal.

General Rule in 1883: If the agent is authorized to act on behalf of the principal but instead acts in his own name, the agent is the one directly liable to the person with whom he had contracted as if the transaction were his own.Exception: If the contract involves something belonging to the principal. Remedy of the Principal if this situation arises: He can demand from the agent damages for his failure to comply with the agency. Remedy of the 3rd person with whom the agent contracted in case the oblig is not complied with: If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined w/o litigation who is liable, he can sue both.