AGENCY Involves two persons: principal and agent The agent represents the principal to: a. Render some serviceb. Do something in behalf of the principal

Characteristics of contract of agency:(1) Consensual perfected by mere consent(2) Commutative both parties receive values that are equivalent to each other(3) Principal can stand by itself without the need of another contract(4) Preparatory means to an end(5) Bilateral creates obligations for both of the parties (6) Onerous there exists a consideration(7) Nominate it has its own name

Essential Elements:1. Consent express or implied2. Object execution of juridical act 3. Agent acts as a representative of the principal4. Agent acts within the scope of his authority

Capacity of the PartiesArticle 78 Juridical Capacity (inherent)Article 38 Capacity to act with legal effect Defective Contract:MinorityInsanityState of being deaf/mute R&WProdigalityCivil Interdiction

The law does not require that the agent must possess full capacity to bind the contracts entered by him. However, he must possess mental capacity such that insane persons cannot represent the principal.

Note: The contract entered by an incapacitated agent and principal (contract of agency) is voidable but the contract entered by the third person and agent in behalf of the principal is valid.

The relationship of the agent and principal is fiduciary it is a relationship built with trust and good faith. That is why; no written agreement is needed.

Matters that can be delegated:Any act can be delegated to the agent except:a. Personal Acts i.e. obligations of husband and wifeb. Acts Prohibited by Law i.e. illegal & criminal acts

Agency as distinguished from other contractsAgencyPartnership

An agent acts for his principal and not for himselfA partner acts for himself, his firm and his partners

AgencyLoan

An agent may be given funds by the principal to advance the latters businessBorrower is given money for purposes of his own and he must generally return it

AgencyGuardianship

Agent represents a capacitated person

Agent is appointed by the principal and is not permanent

Agent is subjected to the directions of the principal

Agent can make the principal personally liableGuardian represents an incapacitated person

Guardian is appointed by the court

Guardian is not subject to the direction of the ward but must act for the benefit of the ward

Guardian has no power to impose personal liability on the ward

AgencyJuridical Administration

Agent is appointed by the principal

Agent represent principal

Agent is controlled by the principal through their agreementJudicial administrator is appointed by the court

He represents the court, the heir and creditors of the estate

His acts are subject to specific orders from court

AgencyLease of Property

Agent is controlled by the principal

May involve other things than the property

Agent can bind the principalLease is not controlled by the lessor

It is involved with property only

Lessor cannot bind the lessee

AgencyLease of Services

Agent represents principal

Contract may be terminated at the will of either parties

Agent exercises discretionary powersWorker does not represent his employer

Contract can be terminated only at the will of both

Worker has ministerial functions

AgencyNegotiorum Gestio

There is a contract caused by meeting of the minds

Created by partiesThere is no meeting of the minds and only a quasi-contract (Representation is not agreed upon)

Relation is created by law

Agency to SellSale

Ownership of goods is not transferred to agent

Agent delivers the priceOwnership is transferred to the buyer

Buyer pays the price

Agency to BuySale

Agent acquires ownership in behalf of principal

Agent delivers the priceBuyer acquires ownership for himself

Buyer pays the price

Article 1869 Kinds of Agency according to manner of creation:1. Express either oral or written2. Implied a. From principals silence b. From principals lack of actionc. From principals failure to repudiate the agencyContract of agency may be formed through:1. Appointment2. Ratification (w/o authority but principal benefitted)3. Estoppel (w/o authority but parties are present)4. Necessity

Article 1870 Acceptance of the agent: Acceptance of the agent may be expressed or implied (from his acts, his silence or inaction)Article 1871 Implied acceptance can be distinguished into two:1. Parties are present2. Parties are absent Both being present, implied acceptance is also noted when the agent receives a power of attorney from the principal himself without any objection Power of Attorney: written authorization to an agent to perform specified acts in behalf of his principal which acts, when performed shall have binding effect on the principalArticle 1872 Appointment of Agent through special information Between persons who are absent, acceptance of the agent cannot be implied from silence except:1. the principal transmits his power of attorney to the agent who receives it w/o objection2. the principal entrusts to him by letter a power of attorney with respect to the business in w/c he is habitually engaged as an agent and did not reply to the letter Note that a mere failure to give a reply does not mean the agency has been accepted. The agent must write a letter acknowledging the receipt of the power of attorney but offers no objection. Revocation must be through special informationArticle 1873Appointment of Agent through public advertisement Any form of advertisement used by a principal informing that he has given a power of attorney to a third person is binding Revocation must be made through public advertisement

Article 1874Sale of a piece of land through an agentAgency must be in writing otherwise sale is void Purchase of a piece of land through an agentAgency does not need to be in writing but the agent must have special power of attorney.

Article 1878Special Power of AttorneyThis refers to a clear mandate specifically authorizing the performance of the act. A general power of attorney comprises only acts of administration.

This is necessary in following cases:(1) to make such payments as are not usually considered as acts of administration(2) to effect novation to put an end to obligations already existing at the time the agency was made(3) to compromise, arbitrate, renounce the right to appeal judgment, waive, abandon prescription (4) condonation and remission(5) ownership of an immovable property(6) donation (7) loan or borrow money(8) lease any real property for more than one year(9) render some service without compensation(10) contract of partnership(11) principal as guarantor (12) create real rights over immovable property(13) accept or repudiate an inheritance(14) ratify obligation contracted before the agency(15) other act of strict dominion

Article 1881Principles of AgencyContract of agency is a contract of representation An agent must perform within scope of authority He must act in representation or in behalf of principal

Article 1882If an agent performs an act, technically exceeded his scope of authority but is beneficial to the principal, it is not deemed to have exceeded its authority Effects:1. With authority and in principals behalfValid contract; principal is bound and agent is not personally liable 2. With authority and in agents behalfArticle 1883 Not binding on the principal except when it involves the property of the principal 3. Without authority and in principals behalfUnenforceable contract between principal and third party but can be ratified when the principal accepted the consideration/ when he benefitted. 1898. If the third party is aware, contract is void4. Without authority and in agents behalfValid contract between agent and third party

Obligations of the AgentArticle 1884 To carry out the agency in accordance w/ its terms To answer for damages with through his nonperformance the principal may suffer To finish the business already begun on the death of the principal

Article 1885Person declines the agency A person is free to refuse to be an agent however he must observe the diligence of a good father of a family in the goods or property forwarded to him and return them.

Article 1929Agent withdraws from agency The agent may withdraw for a valid reason but he must continue to act until the principal appointed a new agent If there will be damages, the agent is liable. However, withdrawal is justifiable, the agent is not liable. There must be notice given to the principal

Article 1886Advance necessary funds Agent is authorized to give advances in representation of the principal. However, he must be reimbursed except when the principal is insolvent. In case of the principals insolvency, it is a ground for extinguishment of agency. Failure of the principal to reimburse: agent is bound for redemption

Article 1887Follow instructionsThe agent is bound to follow instructions of the principal.AuthorityInstruction

2Extent of agents power to represent the principale.g. lease of property Conerns only the principal and agent since hese are private orders given to agents e.g. lease to foreigners

The third party does not need to know the instructions of the principal to the agent. If the agent did not follow, the agent is bound to the principal but the principal is still bound to the third party.

Article 1890Borrowing and lending of the principalIf the authority given is to lend money, the agent is not allowed to be the borrower. If the authority given is to borrow money, the agent is allowed to be the lender.

Article 1892Substitute/Sub-agentIf it is prohibited: Appointment of the sub-agent is void All acts of the sub-agent is void. Principal can go against the sub-agent or agent for any damages to his part If the contract is silent The agent is solely responsible for the sub-agentIf authorizeda. Agent appointed the sub-agentAgent will not be liable unless sub-agent is notoriously incompetent or insolventb. Principal appointed the sub-agent Agent is not liable even if sub-agent is notoriously incompetent or insolvent

Article 18942 or more agents with joint liabilityEach agent will be responsible for his own act thus an agent will not be liable for the fault of another. If both are at fault, liability is joint (divided equally)

Article 18952 or more agents with agreed solidary liabilityAgreement for solidary agents is allowed. Thus an act of one is an act of the other. In case one of the agents is at fault, the principal can go against any of the agent and can recover the entire damages

Exception: In case one exceeded his authority, only the agent at fault is liable.

Article 1903Commission AgentCommission/ Factor AgentBroker

Receives commission upon the successful conclusion of the sale Broker earns his pay merely by bringing the buyer & seller together

1905. Commission Agent cannot, without the consent of the principal, sell on credit. If he does so, the principal may demand from him payment in cash but he is entitled to any interest or benefit which may result from sale If there is authority from the principal to sell on credit, agent must inform the principal with a statement of the names of the buyers. Failure to do so, the sale shall be deemed made for cash 1907. Del Credere Commission Agent receives additional payment to warrants the performance of the third party and bears risk of collection of payment.

Obligations of the Principal Article 1910To comply with all the obligations which the agent may have contracted within the scope of his authority

Article 1912Advances made by an agentThe principal must advance to the agent the sums necessary for the execution of the agency. Should the agent have advanced them, the principal must reimburse him even if the business was not successful provided the agent is free from all faults. Reimbursement shall include interest on the sums advanced from the day the advance was made.

The principal is liable for expenses incurred by the agentException:1. agent acted n excess of authority given2. expenses are due to the fault of agent3. agent incurred expenses even if he is aware that it is prejudicial to the principal4. there is agreement that agent will be liable

Article 1916Incompatible ContractsWhen two persons contract with regard to the same thing, one with the agent and the other with the principal, that of prior date shall be preferred, without prejudice to the provision of Article 1544.Article 1544 Double Sales1. Movable Propertya. Possessor in Good Faithb. Oldest Title in Good Faith2. Immovable Propertya. Registrant in Good Faithb. Possessor in Good Faithc. Oldest Title in Good FaithThe other one that is not preferred can demand damages against:1. If agent is aware of sale of principal and still sold the property (Agent is in Bad Faith) agent is liable2. If agent is in good faith principal is liable

Extinguishment of AgencyE expiration D death, civil interdiction, insanity, insolvency of P&AW withdrawal of the agent A accomplishment of the purpose of agencyR revocation D dissolution of the firm or corporation

ExpirationSpecial power of attorney is valid until revoked or until it falls under one of the modes of extinguishment

Death of the PrincipalArticle 1930Even after the death of the principal, agency is not terminated given the following:a. mutual benefit of the parties b. benefit of the third party who approved of the sale

Article 1931Without knowledge of death of the principalAny act of the agent, without the knowledge of the death of the principal is valid and shall be fully effective.

Death of the AgentArticle 1932The heirs must notify the principal.

RevocationArticle 1920 The principal may revoke the agency at will and compel the agent to return the document evidencing the agency through express or implied. Agent is bound to recover damages from the principal.

Implied revocation:a. Appointment of a new agent (there must be a notice to the former agent)b. Principal directly manages the business entrusted to the agent c. A special power of attorney revokes a general power of attorney

Revocation is not allowed:1. Bilateral contract depends on the contract of agency e.g. P sold the property to A on installments. P authorized A to manage the building where the salary is payment for the remaining installment2. Agency is a means to fulfill another contracte.g. P has a loan from A. P authorized A to collect from X because X is indebted to P.

Article 1922Notice of Revocation If the agency has been entrusted for the purpose of contracting with specified persons, revocation will not prejudice the third person until notice is given. If there is not notice and the third person entered into the contract, principal is bound to the third person. If the third party is not aware but there is a publication, the principal is still bound. Article 1923 If the agency has been entrusted for the purpose of contracting with the general public, the principal is not bound to notify in case of revocation