THE LAW AND PRACTICE ON PHILIPPINE AGENCY LAW Some of the legal consequences that flow from the

Some of the legal consequences that flow from the doctrine of representation in the contract of agency
NATURE, FORM AND KINDS OF AGENCY are that

I. DEFINITION AND OBJECTIVE OF AGENCY Notice to the agent is notice to the principal. Air France v. Court of Appeals , 126 SCRA 448 (1983).

1. Definition and Objective of Agency Knowledge of the agent pertains to the principal

Article 1868 of the Civil Code defines the contract of agency as one whereby a person binds himself to When an agent purchases the property in bad faith, the principal is deemed to be a purchaser in bad
render some service or to do something in representation or on behalf of another, with the consent or faith. Caram, Jr. v. Laureta , 103 SCRA 7 (1981).
authority of the latter. [1]
A suit against an agent in his personal capacity cannot, without compelling reasons, be considered a
In Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007), the Supreme Court held that suit against the principal. Philippine National Bank v. Ritratto Groups, Inc., 362 SCRA 216 (2001).
The underlying principle of the contract of agency is to accomplish results by using the services of others
to do a great variety of things like selling, buying, manufacturing, and transporting. Its purpose is to 2. Parties to a Contract of Agency
extend the personality of the principal or the party for whom another acts and from whom he or she
derives the authority to act. (at p. 592)
The parties to a contract of agency are:
In Orient Air Service & Hotel Representatives v. Court of Appeals, 197 SCRA 645 (1991), the Court held
that the purpose of every contract of agency is the ability, by legal fiction, to extend the personality of the the PRINCIPAL the person represented
principal through the facility of the agent; but the same can only be effected with the consent of the
principal. the AGENT the person who acts for and in representation of another

In Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006), the Court held that It bears stressing that in an The other terms used for the position of agent are attorney-in-fact, proxy, delegate, or
agent-principal relationship, the personality of the principal is extended through the facility of the agent. representative.
In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the
latter would have him do. Such a relationship can only be effected with the consent of the principal, which
must not, in any way, be compelled by law or by any court.[2] (at p. 223) Although Article 1868 of the Civil Code defines agency in terms of being a contract, it should also be
considered that upon the perfection of the contract of agency, it creates between the principal and an
agent an on-going legal relationship which imposes personal obligations on both parties. This is in
In Doles v. Angeles , 492 SCRA 607 (2006), the Court held consonance with the progressive nature of every contract of agency.

The CA is incorrect when it considered the fact that the supposed friends of [petitioners], the actual a. Capacity of the Parties
borrowers, did not present themselves to [respondent] as evidence that negates the agency
relationshipit is sufficient that petitioner disclosed to respondent that the former was acting in behalf of
her principals, her friends whom she referred to respondent. For an agency to arise, it is not necessary The principal must have capacity to contract (Arts. 1327 and 1329), and may either be a natural or juridical
that the principal personally encounter the third person with whom the agent interacts. The law in fact person (Art. 1919[4]).
contemplates, and to a great degree, impersonal dealings where the principal need not personally know
or meet the third person with whom her agent transacts; precisely, the purpose of agency is to extend There is legal literature that holds that since the agent assumes no personal liability, she does not have
the personality of the principal through the facility of the agent. (at p. 622) to possess full capacity to act insofar as third persons are concerned.[3] Since a contract of agency is
first and foremost a contract in itself, the parties (both principal and agent) must have legal capacities to
Lately, in Philex Mining Corp. v. Commissioner of Internal Revenue, 551 SCRA 428 (2008), the Court validly enter into an agency. However, if one of the parties has no legal capacity to contract, then the
reiterated the principle that the essence of an agency, even one that is coupled with interest, is the agents contract of agency is not void, but merely voidable, which means that it is valid until annulled.
ability to represent his principal and bring about business relati0ns between the latter and third persons.
Thus, a voidable agency will produce legal consequences, when it is pursued to enter into juridical
When an agency relationship is established, and the agent acts for the principal, he is insofar as the world relations with third parties. If the principal is the one who has no legal capacity to contract, and his agent
is concerned essentially the principal acting in the particular contract or transaction on hand. enters into a contractual relationship in the principals name with a third party, the resulting contract is
Consequently, the acts of the agent on behalf of the principal within the scope of the authority have the voidable and subject to annulment. On the other hand, if the principal has legal capacity, and it is the
same legal effect and consequence as though the principal had been the one so acting in the given agent that has no legal capacity to contract, the underlying agency relationship is voidable; and when the
situation. Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978); Eurotech Industrial incapacitated agent enters into a contract with a third party, the resulting contract would be valid, not
Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007). voidable, for the agents incapacity is irrelevant, the contract having been entered into, for and in behalf
of the principal, who has full legal capacity.
The foregoing discussions support the fact that as a general proposition the lack of legal capacity of the go into perfection, but rather into the performance stage of the agency relationship. The non-existence of
agent does not affect the constitution of the agency relationship. And yet, it is clear under Article 1919(3) the two purported essential elements (i.e., that the agent acted for herself and/or the agent acted beyond
of the Civil Code that if during the term of the agency, the principal or agent is placed under civil the scope of her authority), does not affect the validity of the existing agency relationship, but rather the
interdiction, or becomes insane or insolvent, the agency is ipso jure extinguished. It is therefore only legality of the contracts entered into by the agent on behalf of the principal.
logical to conclude that if the loss of legal capacity of the agent extinguishes the agency, then necessarily
any of those cause that have the effect of removing legal capacity on either or both the principal and
Thus, under Article 1883 of the Civil Code, If an agent acts in his own name, the principal has no right
agent at the time of perfection would not bring about a contract of agency.
of actions against the person with whom the agent has contracted; neither have such persons against
the principal. Under Article 1898 of the Civil Code, If the agent contracts in the name of the principal,
Obviously, there seems to be an incongruence when it comes to principles involving the legal capacities exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void as to
of the parties to a contract of agency. The reason for that is that the principles actually occupy two different the principal.
legal levels. When it comes to creating and extinguishing the contractual relationship of principal and
agent, the provisions of law take into consideration purely intramural matters pertaining to the parties
a. Consent
thereto under the principle of relativity. Since agency is essentially a personal relationship based on the
purpose of representation, then when either the principal or agent dies or becomes legally incapacitated,
then the agency relation should ipso jure cease. But a contract of agency is merely a preparatory contract, The essential element of consent is manifest from the principle that No person may be represented by
where the main purpose is to effect through the agent contracts and other juridical relationships of the another without his will; and that no person can be compelled against his will to represent another.
principal with third parties. The public policy is that third parties who act in good faith with an agent have
a right to expect that their contracts would be valid and binding on the principal. Therefore, even when
by legal cause an agency relationship has terminated, say with the insanity of the principal, if the agent Thus, the Supreme Court held in Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006), held that consent
of both the principal and the agent is necessary to create an agency: The principal must intend that the
and a third party enter into contract unaware of the situation, then the various provisions on the Law on
Agency would affirm the validity of the contract. More on this point will be covered under the section on agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of
the essential characteristics of agency. the parties must find expression either in words or conduct between them.

3. Elements of the Contract of Agency In the same manner, Dominion Insurance Corp. v. Court of Appeals, 376 SCRA 239 (2002), held that
since the basis for agency is representation, then there must be, on the part of the principal, an actual
intention to appoint or an intention naturally inferable from his words or actions; on the part of the agent,
Like any other contract, agency is constituted of the essential elements of (a) consent; (b) object or there must be an intention to accept the appointment and act on it; and in the absence of such intent,
subject matter; and (c) cause or consideration. there is generally no agency.

In Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978), the Court held that the following Perhaps the only exception to this rule is agency by estoppel, but even then it is by the separate acts
are the essential elements of the contract of agency: of the purported principal and purported agent, by which they are brought into the relationship insofar as
third parties acting in good faith are concerned. More discussions on the essential element of consent
shall take place in the section on essential characteristic of consensuality of contracts of agency.
(a) Consent, express or implied, of the parties to establish the relationship;

b. Object or Subject Matter

(b) Object, which is the execution of a juridical act in relation to third parties;

The object of every contract of agency is service, which particularly is the legal undertaking of the agent
(c) Agent acts as a representative and not for himself; and
to enter into juridical acts with third persons on behalf of the principal.

(d) Agent acts within the scope of his authority.[4]

Items (b), (c) and (d) in the enumerated elements of Rallos can actually be summarized into the object of
every contract of agency to be that of service, i.e., the undertaking (obligation) of the agent to enter into
The element not included in the Rallos enumeration is the cause or consideration of every contract of a juridical act with third parties on behalf of the principal and within the scope of his authority.
agency. Under Article 1875 of the Civil Code, every agency is presumed to be for compensation, unless
there is proof to the contrary. In other words, it is clear that there can be a valid agency contract which is
c. Consideration
supported by consideration of liberality on the part of the agent; that although agency contracts are
primarily onerous, they may also be constituted as gratuitous contracts. The value that Article 1875 of
the Civil Code brings into the Law on Agency is that the presumption is that every agency contract entered The cause or consideration in agency is the compensation or commission that the principal agreed or
into is for valuable considerationthat the agency serves for the benefit of the principal expecting to be committed to be paid to the agent for the latters services. Under Article 1875 of the Civil Code, agency
compensated for his efforts. It is the party who avers that the agency was gratuitousthat the agent is presumed to be for compensation, unless there is proof to the contrary. In other words, liberality may
agreed to serve gratuitously. be the proper cause or consideration for an agency contract only when it is so expressly agreed upon.
Unless otherwise stipulated, therefore, every agent is entitled to remuneration or compensation for the
services performed under the contract of agency.
The last two elements included in the Rallos enumeration should not be understood to be essential
elements for the perfection and validity of the contract of agency, for indeed they are matters that do not
The old decision in Aguna v. Larena, 57 Phil 630 (1932), did not reflect the general rule of agency-is-for- 4. Essential Characteristics of Agency
compensation reflected subsequently in Article 1875 of the Civil Code. In Aguna, although the agent had
rendered service to the principal covering collection of rentals from the various tenants of the principal,
a. Nominate and Principal
and in spite of the agreement that principal would pay for the agents service, nevertheless, the principal
allowed the agent to occupy one of his parcels of land and to build his house thereon. The Court held
that the service rendered by the agent was deemed to be gratuitous, apart from the occupation of some Not only is the contract of agency specifically named as such under the Civil Code, it is a principal contract
of the house of the deceased by the plaintiff and his family, for if it were true that the agent and the because it can stand on its own without need of another contract to validate it.
deceased principal had an understanding to the effect that the agent was to receive compensation aside
from the use and occupation of the houses of the deceased, it cannot be explained how the agent could
have rendered services as he did for eight years without receiving and claiming any compensation from The real value of the contract of agency being a nominate and principal contract is that it has been so
set apart by law and provided with its own set of rules and legal consequences, that any other
the deceased. (at p. 632) If Aguna were decided under the New Civil Code, then under Article 1875,
which mandates that every contract of agency is deemed to be for compensation, then the result would arrangement that essentially falls within its terms shall be considered as an agency arrangement and
have been quite the opposite. shall be governed by the Law on Agency, notwithstanding any intention of the parties to the contrary.
After all, a contract is what the law says it is, and not what the parties call it.

d. Entitlement of Agent to Commission Anchored on the Rendering of Service

In Doles v. Angeles, 492 SCRA 607 (2006), it was held that if an act done by one person in behalf of
another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or
The compensation that the principal agrees to pay to the agent is part of the terms of the contract of she is not so calledit will be an agency whether the parties understood the exact nature of the relation
agency upon which their minds meet. Therefore, the extent and manner by which the agent would be or not.
entitled to receive compensation or commission is based on the terms of the contract.
b. Consensual
Sometimes, the terms are not that clear, and decisions have had to deal with the issue of when an agent
has merited the right to receive the compensation either stipulated or implied from the terms of the
contract. The doctrine that may be derived from the various decisions on the matter are anchored on the The contract of agency is perfected by mere consent. Under Article 1869, an agency may be expressed
nature of the contract of agency as a species of contracts of services in general. When the rendering of or implied from the act of the principal, from his silence or lack of action, or failure to repudiate the agency;
service alone, and not the results, is the primordial basis for which the compensation is given, then the agency may be oral, unless the law requires a specific form.[5]
proof that services have been rendered should entitle the agent to the compensation agreed upon. On
the other hand, if the nature of the service to be compensated is understood by the results to be Under Article 1870 of the Civil Code, acceptance by the agent may also be express, or implied from his
achieved, e.g., that a particular contract with a third party is entered into in behalf of the principal, then acts which carry out the agency, of from his silence or inaction according to the circumstances.
mere rendering of service without achievement of the results agreed upon to be achieved would not
entitle the agent to the compensation agreed upon.
c. Unilateral and Primarily Onerous

Thus, in Inland Realty v. Court of Appeals, 273 SCRA 70 (1997), the Court held that
Ordinarily, an agency is onerous in nature, where the agency expects compensation for his services in
the form of commissions. However, Article 1875 recognizes that an agency may be supported by pure
Although the ultimate buyer was introduced by the agent to the principal during the term of the agency, liberality, and thus would be gratuitous, but the burden of proof would be to show that the agency was
nevertheless, the lapse of the period of more than one (1) year and five (5) months between the expiration constituted gratuitously.
of petitioners authority to sell and the consummation of the sale, cannot authorize compelling the
principal to pay the stipulated brokers fee, since the agent was not longer entitled thereto.
When it is gratuitous, the contract of agency is unilateral contract because it only creates an obligation
on the part of the agent. But even when it is supported by a valuable consideration (i.e., compensated or
The Court takes into strong consideration that utter lack of evidence of the agent showing any further onerous agency), it would still be characterized as a unilateral contract, because it is only the fulfillment
involvement in the negotiations between principal and buyer during that period and in the subsequent of the primary obligations of the agent to render some service upon which the subordinate obligation of
processing of the documents pertinent to said sale. (at p. 79) the principal to pay the compensation agreed upon arises.

In contrast, in Manotok Bros. Inc. v. Court of Appeals, 221 SCRA 224 (1993), the Court held that although When an agent accepts the agency position without compensation, he assumes the same responsibility
the sale of the object of the agency to sell was perfected three days after the expiration of the agency to carry out the agency and therefore incurs the same liability when he fails to fulfill his obligations to the
period, the agent was still be entitled to receive the commission stipulated based on the doctrine held principal. It is therefore rather strange that Article 1909 of the Civil Code provides that The agent is
in Prats v. Court of Appeals, 81 SCRA 360 (1978), that when the agent was the efficient procuring cause responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by
in bringing about the sale that the agent was entitled to compensation. In essence, the Court ruled that the courts, according to whether the agency was or was not for a compensation.
when there is a close, proximate and causal connection between the agents efforts and labor and the
principals sale of his property, the agent is entitled to a commission.
d. Preparatory and Representative

The matter pertaining to entitlement to commission will be discussed in greater details in the section that
distinguishes a contract of agency from that of a brokers contract. There is no doubt that agency is a species of the broad grouping of what we call the service contracts,
which includes employment contract, management contract and contract-for-a piece of work. There are
also special service contracts which include the rendering of professional service (e.g., doctors and Earlier, in Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978), the Court held that Agency
lawyers), and consultancy work. But it is the characteristic of representation that is the most is basically personal, representative, and derivative in nature. The authority of the agent to act emanates
distinguishing mark of agency when compared with other service contracts, in that the main purpose is from the powers granted to him by his principal; his act is the act of the principal if done within the scope
to allow the agent to enter into contracts with third parties on behalf of, and which would bind on, the of the authority. Qui facit per alium facit per se. He who acts through another acts himself. (at p. 259)
principal.
(1) Principles Flowing from Agency Characteristics of Prepartatory and Representative
A contract of agency does not exist for its own purpose; it is a preparatory contract entered into for other
purposes that deal with the public. This characteristic of an agency is reflected in various provisions in
The following principles flow from the application of the essential characteristics of an agency being
the Law on Agency and in case-law, that seek to protect the validity and enforceability of contracts entered
preparatory and representative contract, thus:
into pursuant to the agency arrangement, even when to do so would contravene strict agency principles.
In another way of putting it, an agency contract is merely a tool allowed to be resorted to achieve a greater
objective to enter into juridical relations on behalf of the principal; considerations that pertain merely to (a) The contract entered into with third persons pertains to the principal and not to the agent; the agent
the tool certainly cannot outweigh considerations that pertain to the main objects of the agency. is a stranger to said contract although he physically was the one who entered into it in a representative
capacity;
In Amon Trading Corp. v. Court of Appeals, 477 SCRA 552 (2005), the Court decreed that In a bevy of
cases as the avuncular case of Victorias Milling Co., Inc. v. Court Appeals, [333 SCRA 663 (2000)], the the agent has neither rights or obligations from the resulting contract;
Court decreed from Article 1868 that the basis of agency is representation, (at p. 560), and that
consequently one of the strongest feature of a true contract of agency is that of control that the agent
is under the control and instruction of the principal. Thus, in Victorias Milling Co., Inc. v. Court of Appeals, the agent has no legal standing to sue upon said contract
333 SCRA 663 (2000), it was ruled
(b) The liabilities incurred shall pertain to the principal and not the agent;
It is clear from Article 1868 that the basis of agency is representation.[6] On the part of the principal, there
must be an actual intention to appoint or an intention naturally inferable from his words or actions; and (c) Generally, all acts that the principal can do in person, he may do through an agent, except those which
on the part of the agent, there must be an intention to accept the appointment and act on it, and in the under public policy are strictly personal to the person of the principal.
absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency
from other legal concepts is control; one person the agent agrees to act under the control or direction
of another the principal. Indeed, the very word agency has come to connote control by the principal.[7] (d) The agent who acts as such is not personality liable to the party with whom he contracts, unless he
The control factor, more than any other, has caused the courts to put contracts between principal and expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of
agent in a separate category. . . . his powers. (Art. 1897)

xxx (e) Notice to the agent should always be construed as notice binding on the principal, even when in fact
the principal never became aware thereof. Air France v. Court of Appeals, 126 SCRA 448 (1983)

In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form,
and not an agent of STM. Private respondent CSC was not subject to STMs control. The question of (f) Knowledge of the agent is equivalent to knowledge of the principal.
whether a contract is one of sale or agency depends on the intention of the parties as gathered from the
whole scope and effect of the language employed. That the authorization given to CSC contained the EXCEPT WHERE:
phrase for and in our (STMs) behalf did not establish an agency. Ultimately, what is decisive is the
intention of the parties. That no agency was meant to be established by the CSC and STM is clearly
shown by CSCs communication to petitioner that SLDR No. 1214M had been sold and endorsed to it. (1) Agents interests are adverse to those of the principal;
The use of the words sold and endorsed means that STM and CSC intended a contract of sale, and not
an agency. (at pp. 676-677) (2) Agents duty is not to disclose the information, as where he is informed by way of confidential
information; and
In Doles v. Angeles, 492 SCRA 607 (2006), it was held that for an agency to arise, it is not necessary
that the principal personally encounter the third person with whom the agent interacts precisely, the (3) The person claiming the benefit of the rule colludes with the agent to defraud the principal (De Leon
purpose of agency is to extend the personality of the principal through the facility of the agent. & De Leon, at p. 367,citing TELLER, at p.150)

In Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007), the Court held Thus, in Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007), the Court held

It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to
on matters within the scope of his authority and said acts have the same legal effect as if they were the party with whom he contracts. The same provision, however, presents two instances when an agent
personally executed by the principal. By this legal fiction, the actual or real absence of the principal is becomes personally liable to a third person. The first is when he expressly binds himself to the obligation
converted into his legal or juridical presence qui facit per alium facit per se. (at p. 593)
and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he another, WITH THE CONSENT OR AUTHORITY OF THE LATTER. In an agent-principal relationship,
does not give the third party sufficient notice of his powers. (at p. 593) the personality of the principal is extended through the facility of the agent. In so doing, the agent, by
legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do.
Such a relationship can only be effected with the consent of the principal, which must not, in any way, be
In Philpotts v. Phil. Mfg. Co., 40 Phil 471 (1919), the Court held that the right of inspection given to a
compelled by law or by any court. The Agreement itself between the parties states that either party may
stockholder under the law can be exercised either by himself or by any proper representative or attorney
terminate the Agreement without cause by giving the other 30 days notice by letter, telegram or cable.[8]
in fact, and either with or without the attendance of the stockholder. This is in conformity with the general
(at p. 656)
rule that what a man may do in person he may do through another.

5. Distinguished from Similar Contracts

e. Derivative, Fiduciary and Revocable

a. From the Employment Contract

A contract of agency creates a legal relationship of representation by the agent on behalf of the principal,
where the powers of the agent are essentially derived from the principal, and consequently, it is fiduciary
in nature. One of the legal consequences of the fiduciary nature of the contract of agency is that it is Unlike agency relationship which is essentially contractual in nature, an employment contract under
essentially revocable: neither the principal nor the agent can be legally made to remain in the relationship Article 1700 of the Civil Code is The relationship between capital and labor [which] are not merely
when they choose to have it terminated. contractual. They are so impressed with public interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining,
strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects. More
Severino v. Severino, 44 Phil. 343 (1923), held that the relations of an agent to his principal are fiduciary
specifically, the purpose of an employer-employee relationship is for the employee to render service for
in character because they are based on trust and confidence, which must flow from the essential nature
the direct benefit of the employer or of the business of the employer; while agency relationship is entered
a contract of agency that makes the agent the representative of the principal. Consequently:
into to enter into juridical relationship on behalf of the principal with third parties. There is, therefore, no
representation in a contract of employment.
(a) As regards property forming the subject matter of the agency, the agent is estopped from asserting
or acquiring a title adverse to that of the principal. (Art. 1435);
In Dela Cruz v. Northern Theatrical Enterprises, 95 Phil 739 (1954), the Court held that the relationship
between the corporation which owns and operates a theatre, and the individual it hires as a security guard
(b) In a conflict-of-interest situation, the agent cannot choose a course that favors herself to the detriment to maintain the peace and order at the entrance of the theatre is not that of principal and agent, because
of the principal; she must choose to the best advantage of the principal. Thomas v. Pineda, 89 Phil. 312 the principle of representation was in no way involved. The security guard was not employed to represent
(1951); Palma v. Cristobal, 77 Phil. 712 (1946); and the defendant corporation in its dealings with third parties; he was a mere employee hired to perform a
certain specific duty or task, that of acting as special guard and staying at the main entrance of the movie
house to stop gate crashers and to maintain peace and order within the premises.
(c) The agent cannot purchase for herself the property of the principal which has been given to her
management for sale or disposition (Art. 1491[2]);
b. From the Contract for a Piece-of-Work
Unless:
Under Article 1713 of the Civil Code, By the contract for a piece of work the contractor binds himself to
execute a piece of work for the employer, in consideration of a certain price or compensation. The
(i) There is and express consent on the part of the principal (Cui v. Cui, 100 Phil. 913 (1957); or contractor may either employ only his labor or skill, or also furnish the material. Under a contract for a
piece of work, the contractor is not an agent of the principal (i.e., the client), and the contractor has no
(ii) If the agent purchases after the agency is terminated (Valera v. Velasco, 51 Phil. 695 (1928). authority to represent the principal in entering into juridical acts with third parties. The essence of every
contract-for-a-piece-of-work is that the services rendered must give rise to the manufacture or production
of the object agreed upon.
In Republic v. Evangelista, 466 SCRA 544 (2005), the Court held that generally, the agency may be
revoked by the principal at will, since it is a personal contract of representation based on trust and
confidence reposed by the principal on his agent. As the power of the agent to act depends on the will In Fressel v. Mariano Uy Chaco Sons & Co., 34 Phil. 122 (1915), it was held that where the contract
and license of the principal he represents, the power of the agent ceases when the will or permission is entered into is one where the individual undertook and agreed to build for the other party a costly edifice,
withdrawn by the principal. the underlying contract is one for a contract for a piece of work, and not a principal and agency relation.
Consequently, the contract is authorized to do the work according to his own method and without being
subject to the clients control, except as to the result of the work; he could purchase his materials and
In Orient Air Services v. Court of Appeals, 197 SCRA 645 (1991), it was held that the decision of the supplies from whom he pleased and at such prices as he desired to pay. And the mere fact that it was
lower court ordering the principal airline company to reinstate defendant as its general sales agent for stipulated in the contract that the client could take possession of the work site upon the happening of
passenger transportation in the Philippines in accordance with said GSA Agreement, was unlawful since specified contingencies did not make the relation into that of an agency. Consequently, when the client
courts have no authority to compel the principal to reinstate a contract of agency it has terminated with did take over the unfinished works, he did not assume any direct liability to the suppliers of the contractor.
the agent:

c. From the Management Agreement

Such would be violative of the principles and essence of agency, defined by law as a contract whereby
a person binds himself to render some service or to do something in representation or on behalf of
In Nielson & Co., Inc. v. Lepanto Consolidated Mining Co., 26 SCRA 540, 546-547 (1968), the Court held obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.
that in both agency and lease of services, one of the parties binds himself to render some service to the By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was
other party. Agency, however, is distinguished from lease of work or services in that the basis of agency necessarily obliged to pay their price within the term fixed, without any other consideration and regardless
is representation, while in the lease of work or services the basis is employment. The lessor of services as to whether he had or had not sold the beds. (at p. 505)
does not represent his employer, while the agent represents his principal. x x x . There is another obvious
distinction between agency and lease of services. Agency is a preparatory contract, as agency does not
As a consequence, the revocation sought to be made by the principal on the purported agency
stop with the agency because the purpose is to enter into other contracts. The most characteristic feature
arrangement was denied by the Court, the relationship being one of sale, and the power to rescind is
of an agency relationship is the agents power to bring about business relations between his principal and
available only when the purported principal is able to show substantial breach on the part of the purported
third persons. The agent is destine to execute juridical acts (creation, modification or extinction of
agent.
relations with third parties). Lease of services contemplate only material (non-juridical) acts.[9]

Quiroga further ruled that when the terms of the agreement compels the purported agent to pay for the
The Court also held in Nielson & Co. that where the principal and paramount undertaking of the
products received from the purported principal within the stipulated period, even when there has been no
manager under a Management Contract was the operation and development of the mine and the
sale thereof to the public, the underlying relationship is not one of contract of agency to sell, but one of
operation of the mill, and all other undertakings mentioned in the contract are necessary or incidental to
actual sale. A true agent does not assume personal responsibility for the payment of the price of the
the principal undertakingthese other undertakings being dependent upon the work on the development
object of the agency; his obligation is merely to turn-over to the principal the proceeds of the sale once
of the mine and the operation of the mill. In the performance of this principal undertaking the manager
he receives them from the buyer. Consequently, since the underlying agreement is not an agency
was not in any way executing juridical acts for the principal, destined to create, modify or extinguish
agreement, it cannot be revoked except for cause.
business relations between the principal and third person. In other words, in performing its principal
undertaking the manager was not acting as an agent of the principal, in the sense that the term agent is
interpreted under the law of agency, but as one who was performing material acts for an employer, for In Gonzalo Puyat & Sons, Inc. v. Arco Amusement Company, 72 Phil. 402 (1941), which covered a
compensation. Consequently, the management contract not being an agency cannot be revoked at will purported agency contract to purchase, the Court looked into the provisions of their contract, and found
and was binding to its full contracted period. that the letters between the parties clearly stipulated for fixed prices on the equipment ordered, which
admitted no other interpretation than that the [principal] agreed to purchase from the [agent] the
equipment in question at the prices indicated which are fixed and determinate. (at p. 407). The Court
In Shell Co. v. Firemens Insurance of Newark, 100 Phil. 757 (1957), in ruling that the operator was an
held that whatever unforeseen events might have taken place unfavorable to the [agent], such as change
agent of the Shell company, the Court took into consideration the following facts: (a) that the operator
in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr
owed his position to the company and the latter could remove him or terminate his services at will; (b)
Piano Company to properly fill the orders as per specifications, the [principal] might still legally hold the
that the service station belonged to the company and bore its tradename and the operator sold only the
[agent] to the prices fixed. (at p. 407). It was ruled that the true relationship between the parties was in
products of the company; that the equipment used by the operator belonged to the company and were
effect a contract of sale. Consequently, the demand by the purported principal of all discounts and
just loaned to the operator and the company took charge of their repair and maintenance; (c) that an
benefits obtained by the purported agent from the American suppliers under the theory that all benefits
employee of the company supervised the operator and conducted periodic inspection of the companys
received by the agent under the transactions were to be accounted for the benefit of the principal, was
gasoline and service station; and (d) that the price of the products sold by the operator was fixed by the
denied by the Court.
company and not by the operator.

Gonzalo Puyat also ruled that when under the terms of the agreement, the purported agent becomes
d. From the Contract of Sale
responsible for any changes in the acquisition cost of the object he has been authorized to purchase from
a supplier in the United States, the underlying agreement is not an contract of agency to buy, since an
Under Article 1466 of the Civil Code, In construing a contract containing provisions characteristic of both agent does not bear any risk relating to the subject matter or the price. Being truly a contract of sale, any
the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument profits realized by the purported agent from discounts received from the American supplier, pertain to it
shall be considered. Jurisprudence has indicated what the essential clauses that should indicate with no obligation to account for it, much less to turn it over, to the purported principal. Reiterated in Far
whether it is one of sale or agency to sell/purchase, refers to stipulations in the contract which places Eastern Export & Import Co., v. Lim Tech Suan, 97 Phil. 171 (1955).
obligations on the part of the purported agent having to do with what should be a seller obligation to
transfer ownership and deliver possession of the subject matter, or the buyers obligation on the payment
In Chua Ngo v. Universal Trading Co., Inc., 87 Phil. 331 (1950), where a local importing company was
of the price.
contracted to purchase from the United States several boxes of oranges, most of which were lost in
transit, the purchaser sought to recover the advance purchased price paid, which were refused by the
In Quiroga v. Parsons, 38 Phil. 501 (1918), although the parties designated the arrangement as an local importing company on the ground that it merely imported the oranges as agent of the purchaser for
agency agreement, the Court found the arrangement to be one of sale since the essential clause provided which it could not be held liable for their loss in transit. The Court, in reviewing the terms and conditions
that Payment was to be made at the end of sixty days, or before, at the [principals] request, or in cash, of the agreement between the parties, held that the arrangement was a sale rather than a contract of
if the [agent] so preferred, and in these last two cases an additional discount was to be allowed for prompt agency to purchase on the following grounds: (a) no commission was paid by the purchaser to the local
payment. These conditions to the Court were precisely the essential features of a contract of purchase importing company; (b) the local importing company was given the option to resell the oranges if the
and sale because there was the obligation on the part of the purported principal to supply the beds, and, balance of the purchase price was not paid within 48 hours from notification, which clearly implies that
on the part of the purported agent, to pay their price, thus: the local importing company did in fact sell the oranges to the purchaser; (c) the local importing company
placed order for the oranges a lower the price agreed upon with the purchaser which it could not properly
do if indeed it were merely acting as an agent; (d) the local importing company charged the purchaser
These features exclude the legal conception of an agency or order to sell whereby the mandatory or
with a sales tax, showing that the arrangement was indeed a sale; and (e) when the losses occurred, the
agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he
local importing company made claims against the insurance company in its own name, indicating that he In Lim v. Court of Appeals, 254 SCRA 170 (1996), it was held that as a general rule, an agency to sell on
imported the oranges as his own products, and not merely as agent of the local purchaser. commission basis does not belong to any of the contracts covered by Articles 1357 and 1358 of the Civil
Code requiring them to be in a particular form, and not one enumerated under the Statutes of Frauds in
Article 1403. Hence, unlike a sale contract which must comply with the Statute of Frauds for enforceability,
In Pearl Island Commercial Corp. v. Lim Tan Tong, 101 Phil. 789 (1957), the Supreme Court was unsure
a contract of agency to sell is valid and enforceable in whatever form it may be entered into.
of its footing when it tried to characterize a contract of sale (Contract of Purchase and Sale) between
the manufacturer of wax and its appointed distributor in the Visayan area, as still being within a contract
of agency in that while providing for sale of Bee Wax from the plaintiff to Tong and purchase of the same The old decision in National Rice and Corn Corp. v. Court of Appeals, 91 SCRA 437 (1979), presents an
by Tong from the plaintiff, also designates Tong as the sole distributor of the article within a certain interesting situation where it is possible for a party to enter into an arrangement, where a portion thereof
territory. (at p. 792) is as agent, and the other portion would be as buyer, and still be able to distinguish and set apart to the
two transactions to determine the rights and liabilities of the parties.
The reasoning in Pearl Island is wrong, of course, since as early as in Quiroga v. Parson, the Court had
already ruled that appointing one as agent or distributor, when in fact such appointee assumes the In National Rice a formal contract was entered into between the National Rice & Corn Corp. (NARIC) and
responsibilities of a buyer of the goods, does not make the relationship one of agency, but that of sale. the Davao Merchandising Corp. (DAMERCO), where they agreed that DAMERCO would act as an agent
Perhaps the best way to understand the ruling in Pearl Island was that the suit was not between the buyer of NARIC in exporting the quantity and kind of corn and rice mentioned in the contract (Exhibit A), as
and seller, but by the seller against the surety of the buyer who had secured the shipment of the wax to well as in importing the collateral goods that will be imported thru barter on a back to back letter of credit
the buyer, and the true characterization of the contract between the buyer and seller was not the essential or no-dollar remittance basis; and with DAMERCO agreeing to buy the aforementioned collateral
criteria by which to fix the liability of the surety, thus goods. Although the corn grains were duly exported, the Government had issued rules banning the barter
of goods from abroad. NARIC then brought suit against DAMERCO seeking recovery of the price of the
exported grains. The Court ruled that insofar as the exporting of the grains was concerned, DAMERCO
True, the contract (Exhibit A) is not entirely clear. It is in some respects, even confusing. While it speaks
acted merely as agent of NARIC for which it cannot be held personally liable for the shortfall considering
of sale of Bee Wax to Tong and his responsibility for the payment of the value of every shipment so
that it had acted within the scope of its authority. The Court had agreed that indeed the other half of the
purchased, at the same time it appoints him sole distributor within a certain area, the plaintiff undertaking
agreement whereby DAMERCO bound itself as the purchaser of the collateral goods to be imported
is not to appoint any other agent or distributor within the same area. Anyway, it seems to have been the
from the proceeds of the sale of the corn and rice, was a valid and binding contract of sale, but for which
sole concern and interest of the plaintiff to be sure that it was paid the value of all shipments of Bee Wax
DAMERCO could not be made to pay the purchase price, because NARIC itself was no longer in a
to Tong and the Surety Company by its bond, guaranteed in the final analysis said payment by Tong,
position to import any of such goods into the country, by reason of force majeure, thus
either as purchaser or as agent. . . . (at p. 793)

It is clear that if after DAMERCO had spent big sums incident to carrying out the purpose of the contract,
In Ker & Co., Ltd. v. Lingad, 38 SCRA 524 (1971), covering a contract of distributorship, it was specifically
the importation of the remaining collateral goods worth about US$480,000.00 could not be effected due
stipulated in the contract that all goods on consignment shall remain the property of the Company until
to suspension by the government under a new administration of barter transactions, the NARIC (now
sold by the Distributor to the purchaser or purchasers, but all sales made by the Distributor shall be in his
Rice and Corn Administration) ought to make the necessary representations with the government to
name; and that the Company at its own expense, was to keep the consigned stock fully insured against
enable DAMERCO to import the said remaining collateral goods. The contract, Exhibit A, has reciprocal
loss or damage by fire or as a result of fire, the policy of such insurance to be payable to it in the event
stipulations which must be given force and effect. (at p. 449)
of loss. It was further stipulated that the contract does not constitute the Distributor the agent or legal
representative of the Company for any purpose whatsoever. Distributor is not granted any right or
authority to assume or to create any obligation or responsibility, express or implied in behalf of or in the Although it is clear from the decision that DAMERCO had assumed also the position of being a buyer of
name of the Company, or to bind the Company in any manner or thing whatsoever. In spite of such goods from NARIC, the Court in National Rice was able to segregate his role as merely an agent of
stipulations, the Court did find the relationship to be one of agency, because it did not transfer ownership NARIC insofar as the export of the grains was concerned, and apply the doctrine that an agent does not
of the merchandise to the purported distributor, even though it was supposed to enter into sales assume any personal obligation with respect to the subject matter of the agency nor of the proceeds
agreements in the Philippines in its own name, thus: thereof, his obligation being merely to turn-over the proceeds to the principal whenever he receives
them. National Rice also demonstrate the progressive nature of every contract of agency, in that it
presents a pliable legal relationship which may be adopted into other relationships, such a contract of
The transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such
sale, to be able to achieve commercial ends.
transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor
as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as e. From Broker
his property, but as the property of the principal, who remains the owner and has the right to control the
sale, fix the price, and terms, demand and receive the proceeds less the agents commission upon sales
A broker is best defined in Schmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988), where the
made. (at p. 530)
Court held that a broker is one who is engaged, for others, on a commission, negotiating contracts
relative to property with the custody of which he has no concern; the negotiator between other parties,
In Victoria Milling Co., Inc. v. Court of Appeals, 333 SCRA 663 (2000), the Court held that an authorization never acting in his own name but in the name of those who employed him. . . . a broker is one whose
given to the buyer of goods to obtain them from the bailee for and in behalf of the bailor-seller does not occupation is to bring the parties together, in matters of trade, commerce or navigation. (at p. 501) In
necessarily establish an agency, since the intention of the parties was for the buyer to take possession other words, the services of a broker is to find third parties who may be interested in entering into
and ownership over the goods with the decisive language in the authorization being sold and endorsed. contracts with other parties over particular matter, and may include negotiating in behalf of both parties
the perfection of a contract, but that the actual perfection must still be done by the parties represented. A
broker essentially is not an extension of the persons of the parties he is negotiating for.
In Reyes v. Rural Bank of San Miguel, 424 SCRA 135 (2004), the Court held that unlike an agent who In Araneta, Inc. v. Del Paterno, 91 Phil. 786 (1952), it was held that the prohibition in Article 1491(2) of
must act in the name of the principal, a broker is one who is engaged for others on a commission to the Civil Code which renders an agent legally incapable of buying the properties of his principal connotes
negotiate between other parties, never acting in his own name but in the name of those who employed the idea of trust and confidence; and so where the relationship does not involve considerations of good
him. faith and integrity the prohibition should not and does not apply. To come under the prohibition, the agent
must be in a fiduciary relation with his principal.
In Pacific Commercial Co. v. Yatco, 63 Phil. 398 (1936), the Court ruled that a broker has no relation with
the thing he has been retained to buy or to sell; he is merely an intermediary between the purchaser and The Court held that a broker does not come within the meaning of Article 1492, because he is nothing
the vendor. He acquires neither the custody nor the possession of the thing he sells; his only office is to more than a go-between or middleman between the defendant and the purchaser, bringing them together
bring together the parties to the transaction. to make the contract themselves. There is no confidence to be betrayed, since a broker is not authorized
to make a binding contract for the purported principal; he is not sell the property, but only to look for a
buyer and the owner is to make the sale; he was not to fix the price of the sale because the price had to
It must be noted though that a broker may at the same time be an agent. When he acts in his behalf in
be already fixed in his commission; he is not to make the terms of payment because these, too, would
dealing with the public, even when he handles things pertaining to the principal, he is a mere broker. On
be clearly specified in his commission. In fine, a broker is left no power or discretion whatsoever, which
the other hand, if he is duly authorized to act in the name of the principal, there is no doubt that the broker
he could abuse to his advantage and to the owners prejudice.
is also an agent. Thus, in Abacus Securities Corp. v. Ampil, 483 SCRA 315 (2006), it was held that since
in that case the brokerage relationship was necessary a contract for the employment of an agent,
principles of contract law also govern the broker-principal relationship. (3) Brokers Entitlement to Commission

In the same manner, in Domingo v. Domingo, 42 SCRA 131 (1971), the Court held that the duties and In quite a number of decisions, the Supreme Court has held that the determination of whether one is an
liabilities of a broker to his employer are essentially those which an agent owes to his principal. In such agent or a broker constitutes a critical factor of whether he would be entitled to the commission stipulated
a situation, the decisive legal provisions to determine whether a broker has violated his duty or obligation] in the contract.
are found in Articles 1891 and 1909 of the New Civil Code, whereby 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
Thus, in Tan v. Gullas, 393 SCRA 334 (2002), quoting from Schmid & Oberly, Inc. v. RJL Martinez Fishing
agency, even though it may not be owning to the principal; and that an agent is responsible not only for
Corp., 166 SCRA 493 (1988), it defined a broker as one who is engaged, for others, on a commission,
fraud, but also for negligence.[10] On the other hand, the Court also held in Domingo that The duty
negotiating contracts relative to property with the custody of which he has no concern; the negotiator
embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a
between other parties, never acting in his own name but in the name of those who employed him. x x x
middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter
a broker is one whose occupation is to bring the parties together, in matters of trade, commerce or
will negotiate on the terms and conditions of the transaction. (at p. 140)
navigation. (at p. 339) The Court then held that An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the
(1) Broker Has No Authority To Enter into Contract in the Name of the Principal seller together, even if no sale is eventually made. . . . Clearly, therefore, petitioners, as brokers, should
be entitled to the commission whether or not the sale of the property subject matter of the contract was
concluded through their efforts. (at p. 341)
In Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006), it was held that a real estate broker is one who
negotiates the sale of real properties; his business, generally speaking, is only to find a purchaser who is
willing to buy the land upon terms fixed by the owner. He has no authority to bind the principal by signing Also, in Hahn v. Court of Appeals, 266 SCRA 537 (1997), the Court held that Contrary to the appellate
a contract of sale. Indeed, an authority to find a purchaser of real property does not include an authority courts conclusion, this arrangement shows an agency. An agent receives a commission upon the
to sell. Thus, when the seller himself closes the sale with the purchaser located by the broker, the seller successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer
is bound to pay the commission he has contracted with the broker for merely finding the buyer. and the seller together, even if no sale is eventually made. (at p. 549)

It must be noted that the ruling in Litonjua, Jr. does not provide for a strict rule on compensability of a It must be noted that the entitlement of a broker or an agent to the commission depends really on the
broker, but like any other contract, its perfection is subject to the terms and conditions that have been wordings of the contract between them, and not really whether one is a broker or agent.
agreed upon. The essence of the ruling in Litonjua, Jr. is that the main service for which the broker was
contracted for is to find a prospective buyer, then if the seller on his own closes the deal with the buyer
In Phil. Health-Care Providers (Maxicare) v. Estrada, 542 SCRA 616 (2008), the Court held that the term
found by the broker, the latter has earned his finders fee.
procuring cause in describing a brokers activity, refers to a cause originating a series of events which,
without break in their continuity, result in the accomplishment of the prime objective of the employment
On the other hand, it is possible that the terms of the brokers contract is that it is not enough for the of the brokerproducing a purchaser ready, willing and able to buy on the owners terms. To be regarded
broker to find the prospective buyer, but that his services must include efforts to negotiate, i.e., convince as the procuring cause of a sale as to be entitled to a commission, a brokers efforts must have been
him to enter into a contract with the client, then it is not enough that the broker found the prospective the foundation on which the negotiations resulting in a sale began. Again, this ruling is correct only if it is
buyer, but he must spend efforts at negotiating with the said person that leads him to enter into a contract clear that the agreement on the services of the broker, for which he would be entitled to his fees, is not
with the client, otherwise mere finding would not entitle the broker to the fees agreed upon. merely of finding the prospective buyer.

(2) Broker Is Not Legally Incapacitated to Purchase Property of the Principal But truly, since both a brokerage arrangement and an agency agreement are inherently contractual
relations, the entitlement of a broker or agent to the compensation or commission stipulated would have
to depend upon the contractual clause covering the same. In other words, it may well be stipulated in a
true brokerage arrangement that the broker would be entitled to a commission only when a sale is [3]DE LEON AND DE LEON, COMMENT AND CASES ON PARTNERSHIP AGENCY AND TRUSTS,
eventually made. In the same manner, the agency contract may well stipulate that the agent shall be 2005 ed., at p. 356; hereinafter referred to as DE LEONS.
entitled to earn commission by merely bringing the buyer and the seller together, even when the actual
sale of the person referred to by the agent happens long after the agency relationship has terminated.
[4]Reiterated in Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007).

To illustrate, in Guardex v. NLRC, 191 SCRA 487 (1990), the Court held that when the terms of the
[5]See also Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006).
agency arrangement is to the effect that entitlement to the commission was contingent on the purchase
by a customer of a fire truck, the implicit condition being that the agent would earn the commission if he
was instrumental in bringing the sale about. Since the agent had nothing to do with the sale of the fire [6]Citing Bordador v. Luz, 283 SCRA 374, 382 (1997).
truck, and is not therefore entitled to any commission at all.
[7]ROSCOE T. STEFFEN, AGENCY-PARTNERSHIP IN A NUSTSHELL (1977) 30-31.
Although Schmid & Oberly, Inc. is now credited with laying down the definition of a broker, the decision
shows that it quoted from the early decision of Behn, Meyer and Co., Ltd. v. Nolting and Garcia , 35 Phil.
274 (1916), where the Court held [8]Reiterated in Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006).

A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts [9]Quoting from REYES AND PUNO, AN OUTLINE OF PHILIPPINE CIVIL LAW, Vol. V, p. 277.
relative to property with the custody of which he has no concern; the negotiation between other parties,
never acting in his own name but in the name of those who employed him; he is strictly a middleman and [10]Citing 12 Am. Jur. 2d 835; 134 ALR 1346; 1 ALR 2d 987; Brown vs. Coates, 67 ALR 2d 943; Haymes
for some purpose the agent of both parties. (19 Cyc., 186; Henderson vs. The State, 50 Ind., 234; Blacks vs. Rogers, 17 ALR 2d 896; Moore vs. Turner, 32 ALR 2d 713.
Law Dictionary.) A broker is one whose occupation it is to bring parties together to bargain, or to bargain
for them, in matters of trade, commerce or navigation. (Mechem on Agency, sec. 13; Wharton on Agency,
sec. 695). Judge Storey, in his work on Agency, defines a broker as an agent employed to make bargains End of Footnotes
and contracts between other persons, in matters of trade, commerce or navigation, for compensation
commonly called brokerage. (Storey on Agency, sec. 28) (at p. 279-280)

Note therefore that broker is considered a commercial term for a person engaged as a middleman to
bring parties together in matters pertaining to trade, commerce or navigation. If the person has not been
given the power to enter into the contract or commerce in behalf of the parties, then he is a broker in
the sense that his job mainly is to bring parties together to bargain, and even then he may not be entitled
to his commission if the bargaining between the parties does not result in a contract being perfected. But
in this sense, the broker does not assume the role of an agent because he has no power to enter into a
contract in behalf of any of the parties; he also assumes no fiduciary obligations to either or both parties,
since they are expected to use their own judgment in deciding to bind or not to bind themselves to a
contract.

On the other hand, if the person has been given the power to enter into a contract or commerce on behalf
of any, or even for both the parties, he is truly an agent. In which case, he assumes fiduciary obligations
to the person who is therefore legally his principal. In such case, he is entitled to a commission if his
efforts (i.e., the services he rendered) where the efficient cause for the eventual perfection and
consummation of the contract that was the object for appointing him broker/agent.

oOo

________________________________________
[1]See Chemphil Export v. Court of Appeals, 251 SCRA 217 (1995); Shoppers Paradise Realty v. Roque,
419 SCRA 93 (2004); Dominion Insurance Corp. v. Court of Appeals, 426 SCRA 620, 626
(2002); Republic v. Evangelista, 466 SCRA 544 (2005); Litonjua, Jr. v. Eternit Corp., 490 SCRA 204
(2006); Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007).

[2]Citing Orient Air Services and Hotel Representatives v. Court of Appeals, 274 Phil. 927, 939 (1991).