01 Introduction and Nature of Agency

Question 1

Art. 1868. By the contract of agency a person binds […].

Answer 1

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.

Question 2

What are the principles/characteristics of a contract of agency?

Answer 2

1. Consensual
2. Principal
3. Nominate
4. Unilateral
5. Preparatory
6. Personal
7. Representative
8. Derivative

Question 3

What is the form of an agency contract?

Answer 3

Art. 1869 (Form of agency contract)

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. (1709a)

Question 4

Is there a required form of acceptance on the part of the agent?

Answer 4

No.

Art. 1870 (Form of acceptance by agent)

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. (n)

Question 5

What are the kinds of agency as to form?

Answer 5

1. Express - one where the agent has been actually authorized by the principal, either orally or in writing (Art. 1869);
2. Implied implied from the acts of the principal, from his:
   
   1. Silence or lack of action
   2. Failure to repudiate knowing another person is acting on his behalf without authority
   3. acts of the agent which carry out the agency
   4. silence or inaction according to the circumstances

Question 6

What are the kinds of agency as to character?

Answer 6

1. Gratuitous - one where the agent receives no compensation for his services;
2. Compensated or onerous - one where the agent receives compensation for his services

Question 7

Kinds of agency as to extent of business covered

Answer 7

1. General - comprises all the business of the principal; (Art 1876)
2. Special - one which comprises one or more specific transactions (Art 1976)

Question 8

Kinds of agency as to authority conferred

Answer 8

1. Couched in general terms - one which is created in general terms and is deemed to comprise only acts of administration; (Art 1977)
2. Couched in specific terms - one authorizing only the performance of a specific act or acts (Art 1878)

Question 9

Kinds of agency as to its nature and effects

Answer 9

1. Ostensible or representative - one where agent acts in the name and representation of the principal (Art 1868);
2. Simple or commission - one where the agent acts in his own name but for the account of the principal.

Question 10

What are the elements of a contract of agency?

Answer 10

Essential elements of agency:

1. Consent, express or implied, of the parties to establish the relationship;
2. The object is the execution of a juridical act in relation to a third person;
3. The agents act as a representative and not for himself; and
4. The agent acts within the scope of his authority. (Rallos v.Go Chan; Eurotech Industrial Tech v. Edwin Cuizon and Erwin Cuizon; International Exchange Bank v. Sps. Briones and John Doe; Sps. Fernando v. Continental Airlines )

Question 11

When is there an implied acceptance of agency between persons who are present?

Answer 11

Where persons are present, the agency is impliedly accepted by the agent if the agent receives a power of attorney from the principal himself personally without any objection both being present.

Art. 1871 (Specific circumstance when acceptance by agent is deemed implied)

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. (n)

Question 12

When shall agency be implied between persons who are absent?

Answer 12

There is implied acceptance between absent persons if the agent writes a letter acknowledging receipt of the power of attorney but offers no objection to the creation of the agency. (No.1) But his mere failure to give a reply does not mean that the agency has been accepted unless the “power of attorney is with respect to the business in which he is habitually engaged as an agent” (No. 2), or the acceptance could be inferred from his acts which carry out the agency (Art. 1870.) as when he begins to act under the authority conferred upon him.

Art. 1872 (Exception to general rule that acceptance cannot be implied between persons who are absent)

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. (n)

Question 13

What is the legal effect if the agent contracts in the name of the principal but agent exceeded the scope of his or her authority?

Answer 13

Art. 1898 (Legal effect of agent contracting beyond scope of his authority)

If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal’s ratification.