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Agency: Characteristics of A Contract of Agency
Agency: Characteristics of A Contract of Agency
2. Purpose
To bind a person to render some service or to do something in representation or on behalf
of another with the latter’s consent or authority.
7. Kinds of Agency
Two (2) Kinds of Agency
1) In General
1. As to manner of creation: Agency may 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. (Art. 1869 CC)
Acceptance by the agent may also be express, or implied from his acts which carry out the agency,
or from his silence or inaction according to the circumstances. (Art. 1870, CC)
As a rule, agency is not presumed. A presumption of agency may arise, however, in those few
cases where agency may arise by operation of law (i.e. Art. 1803, CC) or to prevent unjust
enrichment.
Express; and – An express agency is one where the agent has been actually authorized
by the principal, either:
a. Orally; or
b. In writing [Art.1869, CC]
Implied.
2. As to cause or consideration:
Gratuitous; and
Compensated or onerous.
Note: Agency is presumed to be for a compensation, unless there is proof to the contrary [Art. 1875, CC].
2. He should state that the agent may execute such acts as he may consider
appropriate; or
3. Even though the agency should authorize a general and unlimited management
[Art. 1877, CC]
Couched in specific terms. – An agency couched in specific terms authorizes only the
performance of specific acts. Certain specific acts, however, require special powers of
attorney.
A special power of attorney is 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.
such appointment should not be revoked without the consent of all the partners.
12.To Render Accounts and Deliver Things Received by Virtue of the Agency
Every agent is bound to render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency, even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an account shall be void. Art.
1891, CC
If an agent receives a secret gift from a client, he must report it and deliver it to the principal. The
law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his
principal of all his transactions and other material facts relevant to the agency. If he makes a secret profit,
he is guilty of breach of his loyalty, and he forfeits his right to his commission. [Domingo v. Domingo, G.R. No.
L-30573 (1971)]
Note: Report imports a statement of collections. Accounting means settling of account of administration or agency,
which includes payment.
13.To Be Responsible for Substitutes
General Rule: If the Agent validly appoints a substitute, the Principal is liable for the Substitute’s acts
Exception: [Art. 1892, CC]
1. If the agent appoints a substitute although he was not given the power to appoint one
2. If the agent was given the power to appoint a substitute, and the principal did not designate
the person he can appoint, but he appoints someone who is notoriously incompetent or
insolvent (proven by history or record of failures in similar business ventures in the past).
Note: In the two aforementioned situations, the agent, not the principal, will be the one responsible for the acts of the substitute.
Commission Agent
Ordinary Agent
Acts for and in behalf of the principal Private rule of guidance to the agent
Refers to the manner or mode of agent’s action
Need not have possession of the goods with respect to matters within the permitted scope
of authority
Broker
Has no custody of the thing to be disposed of,
only acts as intermediary between seller and buyer Has custody or possession of the things to be sold
Maintains no relations with things to be Maintain relations with the thing, the buyer and
sold/bought the seller
Requisites:
1. There are two or more principals;
2. The principals have all concurred in the appointment of the same agent; and
3. The agent is appointed for a common transaction or undertaking
e. Extinguishment of Agency
Six (6) Modes of Extinguishment of Agency (E – D – W – A – R – D)
1. Expiration of the period;
2. Death, civil interdiction, insanity or insolvency of principal or of the agent;
3. Withdrawal by the agent;
4. Accomplishment of the object or the purpose of the agency;
5. Revocation; and
6. Dissolution of the firm or corporation which entrusted or accepted the agency.
Note: The list is not exclusive; May also be extinguished by the modes of extinguishment of obligations in general
whenever they are applicable, like loss of the thing and novation.
Exceptions:
1. Agency Coupled with an Interest – The agency shall remain in full force and effect even after the
death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the
interest of a third person who has accepted the stipulation in his favor. Art. 1930, CC
2. Contract between Agent Without Knowledge of Death and Third Person
in Good Faith – Anything done by the agent, without knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons
who may have contracted with him in good faith. Art. 1931, CC
3. Unfinished business – He must also finish the business already begun on the death of the principal,
should delay entail any danger. Par. 2, Art. 1884, CC
Death of Agent -
If the agent dies, his heirs must:
1. Notify the principal thereof; and
2. In the meantime, adopt such measures as the circumstances may demand in the interest of the latter [Art. 1932, CC].
An agent with general powers is most likely, an agent authorized to transact with the general public
in contradistinction to the agent who contracts with specified persons under Art. 1921, CC.
3) Appointment of New Agent
The appointment of a new agent for the same business or transaction revokes the previous
agency from the day on which notice thereof was given to the former agent, without prejudice to the
provisions of the two preceding articles. Art. 1923, CC
Revocation takes effect when notice is given to the former agent, not when the new agent is
appointed.
4) Direct Management by the Principal
The agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons. Art. 1924, CC
If the principal believes that the agent is in breach of the contract and thereby decides to deal with
the business directly, then the agency is said to be revoked. [CMS Logging v CA, supra]
The mere act of direct management by the principal is not enough to revoke the agency without
such intention.
5) Special Authority Revokes the General Authority Where a Special Matter is Involved
A general power of attorney is revoked by a special one granted to another agent, as
regards the special matter involved in the latter. Art. 1926, CC
If Agent 1 is given a general agency, and Agent 2 is later given a special agency, then Agent 1 can
no longer perform the powers granted to Agent 2 under the special agency
6) When Agency Cannot Be Revoked
An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means
of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the
contract of partnership and his removal from the management is unjustifiable. Art. 1927, CC
The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest
of a third person who has accepted the stipulation in his favor. Art. 1930, CC
Even if the agency is coupled with an interest (which means that it is irrevocable), it may still be
revoked if there is just cause to terminate such agency relationship.