ALM1203: LAW ON BUSINESS TRANSACTIONS (SALES, AGENCY , ETC.

)
LECTURE 7: NATURE, FORM, AND KINDS OF AGENCY
2ND SEMESTER | A.Y. 2023-2024. PREPARED BY: CHARLES STEVEN VHEZ S. FERNANDO
LECTURER: DR. MARCOS ANTONIO G. LOPEZ

AGENCY (ART. 1868) ❖ Onerous - every agency is presumed to be for

compensation unless there is proof to the
❖ ART. 1868 By the contract of agency, a person
contrary.
binds himself to render some service or to do
❖ Fiduciary – as it is based on trust and confidence
something in representation or on behalf of
❖ Representative Relation – not a personal one
another, with the consent or authority of the
with third person
latter.
➢ BASIS:
❖ Agency - A relationship that implies a power in
▪ Representation – the acts of the agent on
an agent to contract with a 3rd person on behalf
behalf of the principal within the scope of
of a principal. The basis is representation not a
his authority produce the same legal and
form of service or employment.
binding effects as if the principal
The phrase “for or on our behalf” does not
personally did them.
necessarily establish an agency. What is decisive
➢ DISTINGUISHING FEATURES:
is the intention of the parties.
▪ Representative character; and
WHAT KIND OF CONTRACT IS AGENCY? ▪ Derivative authority
PURPOSE:
❖ It is a preparatory contract. It is a contract
To extend the personality of the principal
entered into its own end but to be able to enter
through the facility of the agent (constructive
into other contracts.
representation)
WHAT ARE THE ESSENTIAL ELEMENTS OF
PARTIES IN AGENCY
AN AGENCY?
❖ Principal – the party being represented
1) Consent, express or implied;
❖ Agent – the party that represents the principal
2) The object of the contract is the execution of a
❖ Sub-agent – agent of the agent; the contract of
juridical act with 3rd persons;
agency may prohibit the agent from appointing
3) The agent acts as a representative and not for
a sub-agent
himself;
4) The agent acts within the scope of his authority. WHO CAN BE PRINCIPAL?

WHAT ARE THE CHARACTERISTICS OF AN • The principal may be a natural person or a

AGENCY? juridical person. He must be capacitated.
• The rule is if a person is capacitated to act for
❖ Consensual – perfected by mere consent
himself or in his own right, he can act through
❖ Principal – does not depend on another contract
an agent.
for its existence and validity
❖ Bilateral/Unilateral MUST THE AGENT HAVE CAPACITY?
➢ Bilateral – if for compensation, it gives rise to
• Insofar as 3rd persons are concerned, it is enough
reciprocal rights and obligations
that the principal is capacitated; but insofar as
➢ Unilateral – if contract is gratuitous, it creates
his obligations to his principal are concerned,
obligations for only one of the parties, i.e.
the agent must be able to bind himself.
agent.
❖ Nominate – it has its own name
❖ Preparatory – entered into as a means to an end
ACTS THAT CANNOT BE DONE THROUGH AGENCY TO SELL VS. SALE
AN AGENT :
AGENCY TO SELL SALE
• Personal Acts – if a personal performance is
Agent receives the Buyer receives the
required by law or public policy or
goods as the goods of goods as owner.
agreement;
the principal.
• Criminal or illegal acts – attempt to delegate
another authority to do an act which, if done Agent delivers Buyer pays the price.
by the principal would be illegal, is void. proceeds of the sale.

AGENCY VS. LEASE OF WORK OR SERVICE Agent can return the Generally, buyer
object in case he is cannot return the object
AGENCY LEASE OF
unable to sell to a 3rd sold.
WORK/SERVICE
person.
Basis is representation Basis is employment
Agent in dealing with Buyer can deal with the
Agent exercises Lessor only performs the thing received is thing as he pleases,
discretionary powers ministerial functions. bound to act according being the owner.
to the instructions of his
3 persons are involved: Only 2 persons
principal.
principal, agent & 3 rd involved: lessor and
person. lessee

Commercial or Matters of mere manual AGENT VS. INDEPENDENT CONTRACTOR

business transactions or mechanical
AGENT INDEPENDENT
execution
CONTRACTOR

Represents the Employed by

AGENCY VS. GUARDIANSHIP principal. employer.

AGENCY GUARDIANSHIP Acts under the control Acts according to his

and instructions of the own method.
Agent represents a Guardian represents an
principal.
capacitated person. incapacitated person.
Principal liable for torts Employer not liable for
Agent appointed by Agent appointed by
committed by agent torts committed by
principal and can be principal and can be
within scope of independent
removed by him. removed by him.
authority contractor.
Agent subject to Guardian not subject to
directions of principal. directions of ward but
must act for his benefit AGENCY VS. PARTNERSHIP

Agent can make Guardian has no power AGENT PARTNER

principal personally to impose personal
Acts for the principal Acts for himself, the
liable. liability on his ward.
nor for himself. firm and co-partners.

Partnership is a branch
on the law on agency
 AGENCY VS. NEGOTIORIUM GESTIO acting on his behalf w/o authority. The
enumeration is not exclusive there may be
AGENCY NEGOTIORIUM
other situations of implied agency
GESTIO
2) As to the Character or Consideration:
There is meeting of No meeting of minds o Gratuitous: The agent receives no
minds compensation for his services.
o Onerous: The agent does receive
Agent is under the Acts according to his
compensation.
control of the principal own sound discretion
3) As to the extent of business covered:
Created by mere Created by law o General: comprises all the business of the
agreement principal.
o Special: comprises one or more specific
transactions.
AGENCY VS. TRUST 4) As to the conferred or management:
o Couched in general terms: deemed to
AGENCY TRUST
comprise only acts of administration.
Arises from contract May be generated by o Couched in specific terms: authorizes
contract or not, or by only the performance of a specific act/s.
law. 5) As to the Nature and effects:
o Representative: the agent acts in the
Agent holds no title Trustee may hold title
name and representation of the
over the property. over the property.
principal.
May be revoked Terminated upon the o Simple/Commission: the agent acts in
anytime accomplishment of the his own name but for the account of the
purpose to which it was principal.
formed or established. o Conventional: created by agreement of
the parties
o Legal: formed by operation of law (Art.
• ART. 1869. Agency must be express, or implied 1803, 1884 par 2,1885, 1929 and 1932)
from the acts of the principal, from his silence 6) As to the Manner of Appointment:
or lack of action, or his failure to repudiate the o Direct: the principal appointed the
agency, knowing that another person is acting agent directly
on his behalf without authority. o Indirect: appointment is through
another person (Art. 381)
NOTE: Agency may be oral unless the law
CAN AN AGENCY BE PRESUMED?
requires a specific form.
❖ Generally, NO. Because the relationship
CLASSIFICATIONS OF AGENCY
between the principal and agent must exist as a
1) As to the Manner of Creation: FACT. The only exceptions to this rule are when
o Expressed: actually authorized, either agency arises by operation of law or agency is
orally or in writing presumed to prevent unjust enrichment.
o Implied: implied from (i.) acts of
IS THERE A FORM REQUIRED?
principal,(ii.) from his silence or lack of
action, or (iii.) his failure to repudiate the Generally, there is NO formal requirements. Agent’s
agency knowing that another person is authority may be oral or written; it may be in public
or private writings. The only exception is when the a. When the principal transmits his power of
law requires a specific form (e.g. sale of real property attorney to the agent, who receives it
or any interest therein by an agent.) without any objection;
b. When the principal entrusts to him by
WHAT IS A POWER OF ATTORNEY?
letter or telegram a power of attorney
❖ Power of Attorney - An instrument in writing with respect to the business in which he is
by which one person, as principal, appoints habitually engaged as an agent, and he
another as his agent and confers upon him the did not reply to the letter or telegram.
authority to perform certain specified acts or
WHAT ARE THE DISTINCTIONS BETWEEN
kinds of acts on behalf of the principal. Its
ART. 1871 AND ART. 1872?
primary purpose is to evidence the authority of
the agent to 3rd parties with/ whom the agent BASIS 1871 1872
deals.
Condition of Both the Both the
❖ Construction - A power of attorney is strictly
Creation principal and principal and
construed and strictly pursued. The instrument
agent are the agent are
will be held to grant only those powers which
present absent
are specified, and the agent may neither go
beyond nor deviate from the power of Atty. The Manner of The Power of The Power of
only exception is when strict construction will delivery attorney is Attorney is not
destroy the very purpose of the power. personally personally
delivered by delivered.
NOTE: Except as may be required by statute, a
the principal to There is
power of attorney is valid although no notary
the agent transmission
public intervened in its execution (Lim Pin v. Liao
by messenger,
Tan, 115 SCRA 296)
letter or
• ART. 1871. Between persons who are present, telephone.
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 • ART. 1873. If a person specially informs another
without any objection. or states by a public advertisement that he has
given a power of attorney to a third person, the
QUESTION:
latter thereby becomes a duly authorized agent,
Between 2 persons who are present, when is in the former case with respect to the person
acceptance deemed implied? who received the special information, and in the
latter case with regard to any person.
ANSWER:
The power shall continue to be in full force
When the agent receives a power of attorney from until the notice is rescinded in the same manner
the principal himself personally without objection in which it was given.

Follow-up Question: 2 WAYS OF GIVING NOTICE OF AGENCY

NO, it can be rebutted by contrary proof. a. By special information; or

b. By public advertisement
• ART. 1872. Between persons who are absent, the
acceptance of the agency cannot be implied EFFECTS:
from the silence of the agent, except:
 a) Special information: the person appointed A 3rd person, having dealt with one as an agent may
as agent is considered such with respect to be estopped to deny the agency as against the
the person to whom it was given. principal, agent, or 3rd persons in interest.
b) Public advertisement: Agent is
❖ Estoppel of 3rd Persons - A 3rd person, having
considered such with regard to any
dealt with one as an agent may be estopped to
person.
deny the agency as against the principal, agent
• Revocation – An agency is revoked in the same
or 3rd persons in interest.
manner as it was given.
❖ Estoppel of the government - The government
GENERAL RULE: Special information needs
is neither estopped by the mistake or error on the
special information of revocation.
part of its agents. But it may be estopped
EXCEPTION: if you can prove 3rd person read
through affirmative acts of its officers acting
the notice in the newspaper.
within the scope of their authority.
WHAT IS AGENCY BY ESTOPPEL?
DISTINCTION BETWEEN IMPLIED AGENCY
❖ There is really no agency at all, but the alleged AND AGENCY BY ESTOPPEL
agent seemed to have apparent or ostensible,
IMPLIED AGENCY AGENCY BY
although no real authority to represent another.
ESTOPPEL
EXAMPLES OF AGENCY BY ESTOPPEL
There is actual agency. There is no actual
❖ Estoppel of Agent - One professing to act as Hence, he has rights agency. Hence, he has
agent for another may be estopped to deny his and duties as agent no rights and duties as
agency both as against his asserted principal and an agent.
the 3rd persons interested in the transaction in
The principal is liable The one who caused
which he is engaged.
alone, not the agent (either the principal or
❖ Estoppel of Principal
agent) is the one
➢ As to AGENT - One who knows that another
responsible. In both
is acting as his agent and fails to repudiate
cases, the third person
his acts, or accept the benefits of them, will
must have acted in
be estopped to deny the agency as against
good faith.
such other.
➢ As to SUB-AGENT - To estop the principal
from denying his liability to a 3rd person, he
SALE OF LAND THROUGH AN AGENT
must have known or be charged with
knowledge of the fact of the transmission • ART. 1874. When a sale of a piece of land or any
and the terms of the agreement between the interest therein is through an agent, the authority
agent and sub-agent. of the latter shall be in writing; otherwise, the
➢ As to 3RD PERSONS - One who knows that sale shall be void.
another is acting as his agent or permitted
Sale, how affected:
another to appear as his agent, to the injury
of 3rd persons who have dealt with the 1. Through the owner himself: if not made in
apparent agent as such in good faith and in writing the contract of sale is unenforceable, not
the exercise of reasonable prudence, is void. It is however subject to ratification.
estopped to deny the agency. 2. Through an agent of the owner: if not in writing
the contract of sale is not unenforceable but void. It
is not therefore subject to ratification. The
 authority of the agent to sell must be in writing, ANSWER:
otherwise the sale is void.
A broker is entitled to commission whenever he
NOTE: A letter is a sufficient authorization to an agent rings to his principal a party who is able and willing
(Jimenez v. Rabot) to take the property, and enter into a valid contract
upon the terms named by the principal, although the
QUESTION:
particulars may be arranged and the matter
Is Repurchase included within the contemplation of negotiated and completed between the principal
law? and the purchaser directly.

ANSWER: A broker is never entitled to a commission for

unsuccessful efforts. It is only after the transaction
The law speaks of Sale. Repurchase, however, through
has been concluded that the broker acquires a vested
an agent, partakes of the nature of sale, which when
interest in or right to his commission.
effected through an agent, the agency should be in
writing to be valid (Fernandez v. Rabot, 4 CAR 221) Furthermore, the transaction needs not only to be
perfected but also consummated to justify the
PRESUMPTION OF AGENCY
broker’s or agent’s commission.
• ART. 1875 Agency is presumed to be for
MEASURE OF COMPENSATION:
compensation unless there is proof to the
contrary. Compensation depends upon the specific
stipulation of the parties. In the absence of such,
The presumption is rebuttable.
compensation shall be based on a quantum meruit
❖ Gratuitous Agency: when the service rendered basis.
is undertaken to be gratuitous, the law does not
EFFICIENT PROCURING CAUSE:
raise an implied promise to pay therefor, though
the service be valuable (Robinson v. Lincoln The broker must be an efficient agent. The means
Trust, 95 NJL 445) employed by him must result in the sale. He must
find the purchaser and the sale must proceed from
QUESTION:
his efforts acting as a broker.
When is an Agent entitled to Compensation?
DOES THE LAW ALLOW DOUBLE AGENCY?
ANSWER:
❖ Double Agency: when the agent is acting
In the absence of a specific agreement, an agent is simultaneously for both the seller and the buyer.
entitled to compensation only after he has
completely or substantially completed his obligation Such agency is disapproved by law for being
as an agent. against public policy and sound morality.

❖ Broker: One who in behalf of others, and for EXCEPTION: The exception is where the
compensation or fee, negotiate contracts relative agent acted with full knowledge and free consent of
to property. He is the negotiator between the the principals.
parties, never acting in his own name, but in the QUESTION:
name of those who employ him. He is strictly a
In case the agent assumes a double agency, what is
middleman and for some purposes, the agent of
both parties. his right to compensation?

QUESTION:
ANSWER:
When is a broker entitled to compensation?
 1. If with knowledge of both principals – e) Attorney-in-fact: One who is
recovery can be had from both. given authority by his principal
2. If without knowledge of both – the agent to do a particular act not of a legal
can recover from neither. character.
3. If with knowledge of only one – as to the
GENERAL AGENT VS. SPECIAL AGENT
principal who knew of that fact and as to the
agent, they are in pari delicto and the courts AS TO… GENERAL SPECIAL
shall leave them as they were, the contract AGENT AGENT
between them is void as against public policy
Scope of All acts Only one or
and good morals.
Authority connected w/ more specific
IS THE AGENCY GENERAL OR SPECIAL? the business in acts in
which he is pursuance of
• ART. 1876. An agency is either general or
engaged. particular
special. The former comprises all the business
instructions or
of the principal. The latter, one or more
w/ restrictions
specific transactions
necessarily
CLASSIFICATION OF AGENTS: implied from
the act to be
1. Universal Agent: One employed to do all
done.
acts that the principal may personally do,
and which the principal can lawfully
delegate to another the power of doing.
Nature of Series a Single
2. General Agent: One employed to transact all
service transactions transaction or
the business of his principal, or all business
authorized involving a a series of
of a particular kind or in a particular place,
continuity of transactions
or in other words, to do all acts connected
service. not involving
with a particular trade, business, or
continuity of
employment.
service.
3. Special/Particular Agent: One authorized to
act in one or more specific transactions, or to Extent to By an act Cannot in a
do one or more specific acts, or to act upon a which agent within the manner
particular occasion. e.g.: may bind scope of his beyond or
a) Attorney at law: One whose principal authority outside the
business is to represent clients in although it specific acts
legal proceedings. may be which he is
b) Auctioneer: One whose business contrary to his authorized to
is to sell property for others to the special perform
highest bidder at a public sale. instructions
c) Broker: One whose business is to
act as an intermediary between 2 Termination Apparent Termination
other parties. of Authority authority does effective as to
d) Factor: One whose business is to not terminate 3rd party unless
receive and sell goods for a by mere agency was for
commission, being entrusted revocation of purpose of
with the possession of the goods authority w/o
involved in the transaction.
 notice to 3rd contracting w/ intention while the other would overthrow it, the
parties. that 3rd party. former is to be chosen.

Instructions of Merely Strictly EXAMPLES OF ACTS OF MERE

Principal construed. ADMINISTRATION

Construction Advisory Limits the 1. To sue for collection of debts;

of authority of 2. To employ workers or servants and
agent. employees needed for the conduct of
business;
3. To engage counsel to preserve the ownership
AGENCY AS ACTS OF ADMINISTRATION and possession of the principal’s property;
4. To lease real property to another person for
• ART. 1877. An agency couched in general 1 year or less, provided the lease is not
terms comprises only acts of
registered;
administration, even if the principal
5. To make customary gifts for charity or to
should state that he withholds no power or
employees in the business managed by the
that the agent may execute such acts as he
agent
may consider appropriate, or even though
6. To borrow money if it is urgent and
the agency should authorize a general or
indispensable for the preservation of the
unlimited management.
things under administration
Agency couched in general terms covers only
WHEN DOES SPECIAL POWERS OF
acts of administration.
ATTORNEY NECESSARY?
NOTE: A general power permits an agent to do all
• ART. 1878. Special powers of attorney are
acts for which the law does not require a special
necessary in the following cases:
power (Dominion Insurance Corp v. CA, 376 SCRA
1) To make such payments as are not usually
244).
considered as acts of administration;
EXCEPTION: The power of the managing partner, 2) To effect novations which put an end to
he may perform acts affecting the ownership if the obligations already in existence at the
same is necessary to promote or accomplish a time the agency was constituted;
declared object of the partnership. 3) To compromise, to submit questions to
arbitration, to renounce the right to appeal
HOW ARE CONTRACTS OF AGENCY from a judgment, to waive objections to
CONSTRUED? the venue of an action or to abandon a
Contracts of agency as well as general prescription already acquired;
4) To waive any obligation gratuitously;
powers of attorney must be interpreted under the
5) To enter into any contract by which the
language used by the parties. The real intention of
ownership of an immovable is
the parties is primarily determined by the language
transmitted or acquired either
used and gathered from the whole instrument.
gratuitously or for a valuable
In case of doubt, resort must be had to the consideration;
situation, surroundings, and relations of the parties. 6) To make gifts, except customary ones for
The intention of the parties must be sustained rather charity or those made to employees in the
than defeated. So if the contract is open to 2 business managed by the agent;
constructions, one of which would uphold the 7) To loan or borrow money, unless the
latter act be urgent and indispensable for
 the preservation of the things which are 1. Settle a contest between the principal and a
under administration; 3rd person regarding the ownership of goods
8) To lease any real property to another person purchased, or
for more than one year; 2. Agree to an account stated, or
9) To bind the principal to render some 3. Do anything not usual or necessary to the
service without compensation; exercise of such authority.
10) To bind the principal in a contract of
partnership; SCOPE OF SPECIAL AUTHORITY TO
11) To obligate the principal as a guarantor or PURCHASE
surety;
❖ Where the agency is a special one or is restricted
12) To create or convey real rights over
to purchases upon certain terms and conditions,
immovable property;
the agent has NO authority to:
13) To accept or repudiate an inheritance;
1. Purchase upon different terms and
14) To ratify or recognize obligations
conditions from those authorized, or
contracted before the agency;
2. Modify or rescind a contract of purchase
15) Any other act of strict dominion.
made by the principal.
❖ Special Power of Attorney - It is an authority SCOPE OF SPECIAL POWER TO SELL
granted by the principal to the agent where the
act for which it is drawn is expressly mentioned. • ART. 1879. A special power to sell excludes
the power to mortgage; and a special power
❖ General Power of Attorney – It is an authority
to mortgage does not include the power to
granted to the agent to do all acts of a particular
sell.
character. A special power can be included in a
general power, either by giving authority for all The power to sell is different from the power
acts of a particular character or by specifying to mortgage in the same way that the latter is
therein the act or transaction for which a special different from the power to contract loans.
power is needed.
THE FOLLOWING ARE INCLUDED IN A POWER-
SCOPE OF GENERAL AUTHORITY TO TO-SELL:
PURCHASE
The power to:
❖ Where an agent’s power to purchase is general
1. Find a purchaser or to sell directly;
and unrestricted, he has implied authority to do
2. Deliver the property;
whatever is usual and necessary in the exercise
3. Make the usual representation and warranty;
of such power. He may:
4. Execute the necessary transfer documents;
1. Determine the usual and necessary details of
5. Fix the terms of the sale unless there be set
the contract,
conditions stipulated by the principal;
2. Agree upon the price,
6. Sell only for cash;
3. modify or rescind the contract of purchase,
7. Receive the price unless he was authorized
4. accept delivery for his principal,
only to solicit orders.
5. give directions for the delivery of the
property purchased, and THE FOLLOWING ARE NOT INCLUDED IN A
6. may borrow money to pay for the care and POWER-TO-MORTGAGE
preservation of the property purchased.
The power to:
❖ But he has NO special power to:
1. Sell;
2. Execute a 2nd mortgage;
 3. Mortgage for the agent’s personal benefit or ❖ Authority: The power of the agent to affect the
for the benefit of any 3rd person, unless the legal relations of the principal by acts done in
contrary has been clearly indicated. accordance with the principal’s manifestation of
consent to him.
QUESTION:
It is the power of the agent to act within the
Does the principal have the power to revoke a
scope of his assignment on behalf of his principal
contract giving an agent exclusive authority to sell?
with binding effect on the latter.
ANSWER:
The authority of the agent is the very essence –
YES. But he may not have the right to use such sine qua non – of the principal and agent
power if he has agreed not to exercise such power relationship. This authority, unless it is otherwise
during a certain period. agreed, includes only the authority to act for the
benefit of the principal, and the source of the
In case he fails to comply with this obligation
authority is the principal and never the agent.
not to do, he will be liable for damages.
KINDS OF AUTHORITY:.
CAN A SPECIAL POWER COMPROMISE IN
BEHALF OF THE PRINCIPAL? 1. Actual: when it is actually granted, and it
may be expressed or implied. It results from
• ART. 1880. A special power to compromise
does not authorize submission to arbitration. what the principal indicates to the agent.
2. Express: when it is directly conferred by
RATIONALE: words.
A principal may authorize his agent to 3. Implied: when it is incidental to the
compromise because of absolute confidence in the transaction or reasonably necessary to
latter’s judgment and discretion to protect the accomplish the purpose of the agency, and
former’s rights and obtain for him the best bargain therefore, the principal is deemed to have
in the transaction. If the transaction is left in the actually intended the agent to possess.
hands of an arbitrator, said arbitrator may not enjoy 4. Apparent or Ostensible: when it is
the trust of the principal. conferred by words, conduct or even by the
silence of the principal which causes a 3rd
QUESTION: person reasonably to believe that a
What happens if the agent is specifically authorized particular person, who may or may not be
to submit to arbitration? the principal’s agent, has actual authority to
act for the principal. Ostensible authority is
ANSWER: another name for authority by estoppel.
Then the arbitration award binds the principal, 5. General: when it refers to all the business of
provided, of course, that the agent acted within the the principal.
scope of his authority. 6. Special: when it is limited only to one or
more specific transactions.
AGENT’S AUTHORITY 7. By necessity or by operation of law: when it
• ART. 1881. The agent must act within the is demanded by virtue of the existence of an
scope of his authority. He may do such acts as emergency; it terminates when the
may be conducive to the accomplishment of emergency has passed.
the purpose of the agency.
REQUISITES OF AGENCY BY NECESSITY:

a. An emergency actually exist

 b. The agent cannot timely communicate with Without Own Valid
the principal authority
c. Exercise of additional authority is for the
QUESTION:
principal’s own protection
d. Adoption of reasonable means to cope with Who to sue?
the situation
ANSWER:
e. Stoppage of authority from the moment the
emergency ceases In case the agent acts in the name of the principal
and within his scope of authority, you must name
REQUISITES FOR PRINCIPAL TO BE
the principal as the defendant.
BOUND BY ACT OF AGENT:
NOTE: The authority to look for buyers does
a. The agent must act on behalf of the principal;
not carry with it the authority to sell.
b. The agent must act within the scope of his
authority. LIMIT OF AGENT’S AUTHORITY

QUESTION: • ART. 1882. The limits of the agent’s

authority shall not be considered exceeded
When is a principal NOT bound by the act of his
should it have been performed in a manner
agent?
more advantageous to the principal than
ANSWER: that specified by him.

When the agent acts without or beyond the scope of QUESTION:

his authority; or when the agent acts within the
What happens if the agent exceeds his authority but
scope of his authority but in his own name except
he performs the agency in a manner more
when the transaction involves things belonging to
advantageous to the principal?
the principal.
ANSWER:
TECHNICAL DIFFERENCE BETWEEN
AUTHORITY AND POWER It will be as if he did not exceed the limits of his
authority since he must do such acts as may be
❖ Authority is the cause, while Power is the
conducive to the accomplishment of the purpose of
effect. The former springs from the principal
the agency.
and is delegated to the agent and by reason
thereof, the agent is empowered to perform the Article 1882 presupposes sufficient
act authorized to be done. authority to fulfill the agency.

AUTHORITY? WHOSE STATUS OF TEST: Would the principal enter into this
BEHALF? TRANSACTION transaction?

Without Principal’s Valid EXAMPLE: The agent is authorized to sell cell

authority phones by installment, but he was able to sell it in
cash.
With authority Own Depends (Art.
1883) WHAT WILL HAPPEN IF AN AGENT ACTS IN
HIS OWN NAME?
Without Principal’s Unenforceable
authority • 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 agent or attorney-in-fact. It must brought in the
against the principal. name of the real party in interest.

In such cases, the agent is the one directly bound in REMEDY OF THE 3RD PERSON WITH
favor of the person with whom he has contracted, as WHOM THE AGENT CONTRACTED IN
if the transaction were his own, except when the CASE THE OBLIGATION IS NOT
contract involves things belonging to the principal. COMPLIED WITH:

The provisions of this article shall be If the case falls under the general rule, he can
understood to be without prejudice to the actions sue the agent. But when the contract involves
between the principal and agent. things belonging to the principal, he can sue the
principal. But if it cannot be determined w/o
❖ GENERAL RULE IN ART. 1883:
litigation who is liable, he can sue both.
If the agent is authorized to act on behalf of
the principal but instead acts in his own name, REMEDY OF 3RD PERSON IN CASE
the agent is the one directly liable to the person AUTHORITY OF THE AGENT IS DOUBTFUL
with whom he had contracted as if the
The agent should be included in the case as
transaction were his own.
a party defendant. This is a suit against
REASON WHY THE AGENT IS PERSONALLY alternative defendants.
LIABLE:
EFFECTS WHEN AN AGENT BECOMES THE
1. He did not act within the scope of his ASSIGNEE:
authority
The agent may on his own behalf bring an action
2. He acts in his own name, not in the name or
founded on a contract made for his principal, as an
representation.
assignee of such contract.
EXCEPTION:
Suppose the contract involves something
belonging to the principal. This exception
applies only when the agent has in fact been
authorized by 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.

QUESTION #1:

May the agent who is directly bound sue in his own

name?

ANSWER:

When the agent transacts business in his own name

for the benefit of an undisclosed principal, he may sue
or be sued, in his individual capacity there being no
action for or against the undisclosed principal.

NOTE: An action on behalf and for the benefit of

the principal cannot be brought in the name of the