ATENEO CENTRAL BAR OPERATIONS 2007

Civil Law
SUMMER REVIEWER

LAW ON AGENCY 2. Agent

a. Insofar as the third persons are
CHAPTER 1: NATURE, FORM AND KINDS OF concerned, it is enough that the principal
AGENCY is capacitated.
b. Insofar as his obligations to his principal
are concerned, the agent must be able to
Contract of Agency is a contract whereby a person bind himself.
binds himself to render some service or to do c. But as an agent, some mental capacity is
something in representation or on behalf of another, necessary, so, those who are absolutely
with the consent or authority of the latter. (Art. 1868) incapacitated (ex. Insane persons)
cannot be agents.

Characteristics: Essential Elements:

1. Consensual 1. Consent of the parties to establish the
2. Nominate relationship;
3. Preparatory 2. Object of the contract is the execution of a
4. Principal juridical act in relation to third persons;
5. Unilateral; 3. Agent acts as a representative and not for
Bilateral (if agency is for compensation) himself; and
4. Agent acts within the scope of his authority.
Nature: Since it is a contract there must be a
meeting of the minds as to consent, object, and Orient Air Services v. CA, G.R. No. 76931, May 29,
cause. 1991
Exception to contractual nature: An illegal termination of agency does not justify
a. When the agency is created by reinstatement of the agent as such. The agency
operation of law cannot be compelled by the courts to be reinstated
Ex: Agency by Estoppel because such relationship can only be effected with
the consent of the principal.
Basis:
 Representation: The acts of the agent on behalf Acts That Cannot Be Done By Agent:
of the principal within the scope of his authority 1. Personal Acts – ex. Making of a will
produce the same legal and binding effects as if 2. Criminal or Illegal Acts
they were personally done by the principal.
 Hence, the distinguishing features of agency are Nature of Relationship between Principal and
its representative character & its derivative Agent:
authority. Fiduciary - based on trust & confidence
1. Agent is estopped from asserting interest
Purpose: Extend the personality of the principal adverse to his principal
through the facility of the agent 2. Agent must not act as an adverse party
3. Agent must not act for an adverse party
Capacity of the Parties: 4. Agent must not use or disclose secret
1. Principal QuickTime™ and a information
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rer. a juridical person 5. Agent must give notice of material facts
b. He must be capacitated. The rule is if a  Knowledge of the agent is imputed to
person is capacitated to act for himself or the principal even though the agent
his own right, he can act through an never communicated
agent. Exceptions:
i. The agent is not liable where he a. Where the interests of
was ignorant of the principal’s the agent are adverse to
incapacity those of the principal;
b. Where the person
claiming the benefit of
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the rule colludes with the Agent in dealing with the Buyer can deal with the
agent to defraud the thing received is bound thing as he pleases,
principal. to act according to the being the owner
instructions of his
Distinction between Agency & Lease of Service principal
Agency Lease of Service
Representation Employment Distinction between Agent & Contractor
Agent exercises Lessor ordinarily Agent Independent Contractor
discretionary powers performs only ministerial Represents his principal Employed by the
functions employer
3 persons are involved: 2 persons are involved: Acts under the principal’s Acts according to his own
principal, agent and the lessor and lessee control and instruction method
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3 person with whom the Principal is liable for torts Employer not liable for
agent contracts committed by the agent torts committed by the
Relates to commercial Relates more to the within the scope of his independent contractor.
or business matters of mere manual authority
transactions or mechanical
execution Distinction between Agency and Partnership
Agency Partnership
Distinction between Agency & Guardianship An agent must submit to A co-partner is not
Agency Guardianship the principal’s right to subject to co-partner’s
Agent represents a A guardian represents an control right to control, unless
capacitated person incapacitated person. there is an agreement to
Agent is appointed by Guardian is appointed that effect
the principal and can be by the court and stands The agent assumes no The partner binds not
removed by the latter. in loco parentis. personal liability where only the firm members
Agent is subject to the Guardian is not subject to he acts within the scope but himself as well
directions of the principal. the directions of the ward of his authority
but must act for the The agent takes his The profits belong to all
benefit of the latter agreed share of profits the partners as common
Agent can make the Guardian has no power not as owner but as an proprietors in agreed
principal personally to impose personal agreed measure of proportions
liable. liability on the ward. compensation for his
services
Distinction between Agency & Lease of Property
Agency Lease of property
Agent is controlled by the Lessee is not controlled
principal. by the lessor. Art. 1869. Agency may be express, or implied
Agency may involve Lease of property from the acts of the principal, from his silence or
things other than involves property. lack of action, or his failure to repudiate the
property. agency, knowing that another person is acting on
Agent can bind the Lessee cannot bind the his behalf without authority.
principal. lessor. Agency may be oral, unless the law requires a
specific form. (1710a)
Distinction between AgQeuin
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Agency to sell Sale
Agent receives the goods Buyer receives the goods Classifications of Agency
as the principal’s goods as owner 1. As to manner of creation
Agent delivers the Buyer pays the price a. Express – agent has been actually
proceeds of the sale authorized by the principal, either
Agent can return the Buyer, as a general rule, orally or in writing
object in case he is cannot return the object b. Implied – agency is implied from the
unable to sell the same sold acts of the principal, from his silence
to a third person or lack of action or his failure to
repudiate the agency knowing that
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another person is acting on his purchaser directly

behalf without authority, or from the  However, a broker is never entitled to
acts of the agent which carry out the commission for unsuccessful efforts.
agency, or from his silence or
inaction according to the Manotoc Brothers, Inc. v. CA, 221 SCRA 224
circumstances [1993]
2. As to character The broker should be paid his commission where
a. Gratuitous – agent receives no he is the efficient procuring cause in bringing the
compensation for his services sale.
b. Onerous – agent receives Efficient procuring cause: when there is a close
compensation for his services proximate and causal connection between the efforts
3. As to extent of business of the principal and labor of the agent and the principal’s sale of
a. General – agency comprises all the property.
business of the principal
b. Special – agency comprises one or Law on Double Agency:
more specific transactions  Disapproved by law for being against public
4. As to authority conferred policy and sound morality EXCEPT where the
a. Couched in general terms – agent acted with full knowledge and consent of
agency is created in general terms the principals
and is deemed to comprise only acts
in the name and representation of Right of agent to compensation in case of double
the principal. agency:
b. Simple or Commission – agent 1. With knowledge of both principals -
acts in his own name but for the recovery can be had from both principals
account of the principal. 2. Without the knowledge of both principals
- the agent can recover from neither
Forms of Agency: 3. With knowledge of one principal - as to the
General Rule: Appointment of an agent may be oral principal who knew of that fact and as to the
or written; no formal requirements agent, they are in pari delicto and the courts
Exception: When the law requires a specific shall leave them as they were, the contract
form (ex. agent’s sale of real property or any between them being void as against public
interest therein) policy and good morals

Art. 1875. Agency is presumed to be for a Art. 1870. Acceptance by the agent may also be
compensation, unless there is proof to the express, or implied from his acts which carry out
contrary. (n) the agency, or from his silence or inaction
according to the circumstances. (n)

 The agent does not have to prove that the Art. 1871. Between persons who are present, the
agency is for compensation. acceptance of the agency may also be implied if
 But, the prima facie presumption that the the principal delivers his power of attorney to the
agency is for a compensation may be agent and the latter receives it without any
contradicted by contrary evidence objection. (n)
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Art. 1872. Between persons who are absent, the
behalf of others and for a compensation/fee acceptance of the agency cannot be implied from
the silence of the agent, except:
When Broker Entitled to Compensation: 1. When the principal transmits his power of
 Whenever he brings to his principal a party who attorney to the agent, who receives it
is able and willing to take the property, and without any objection;
enter into a valid contract upon the terms 2. When the principal entrusts to him by
named by the principal, although the particulars letter or telegram a power of attorney with
may be arranged and the matter negotiated and respect to the business in which he is
completed between the principal and the habitually engaged as an agent, and he
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did not reply to the letter or telegram. (n) The power shall continue to be in full force
until the notice is rescinded in the same manner
in which it was given. (n)
Forms of Acceptance by Agent:
1. Express - when it is oral or written
2. Implied -when it can be inferred from the Way of Giving Notice of Agency & Its Effect:
acts of the agent which carry out the agency, 1. By special information - the person
or from his silence of inaction according to appointed as agent is considered such with
the circumstances respect to the person to whom it was given.
a. Between persons who are present
– implied acceptance if the principal 2. By public advertisement - the agent is
delivers his power of attorney to the considered such with regard to any person
agent and the latter receives it
without any objection How do you revoke an agency?
b. Between persons who are absent In the same manner as it was constituted.
– acceptance not deemed implied However, constitution by Special Information may be
from the silence of the agent. revoked by notice in a daily newspaper, provided it
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Exceptions: can be proven that 3 persons in question read the
i. When the principal transmits his revocation
power of attorney to the agent
who receives it without any What is an agency by estoppel?
objection There is really no agency at all, but the alleged
ii. When the principal entrusts to agent seemed to have apparent or ostensible,
him by letter or telegram a power although no real authority to represent another.
of attorney with respect to the
business in which he is habitually Distinction between Agency by Estoppel and
engaged as an agent, and he did Implied Agency
not reply to the letter or telegram Agency by Implied Agency
Estoppel
What is meant by “present”?
Generally, “face to face”, but includes people Existence
conversing directly through technology (ex. over the There is an actual
of actual No agency at all
telephone). agency
agency
Can be invoked
Power of Attorney: Instrument in writing by which only by a 3
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one person, as principal, appoints another as his Reliance by person who in
agent and confers upon him the authority to perform rd Such reliance in
3 persons good faith relied
certain specified acts or kinds of acts on behalf of the not needed, since
on the conduct of
principal; primary purpose is to evidence agent’s the agent is a real
the principal in
authority to third parties within whom the agent deals agent
holding the agent
out as being
Construction of Power of Attorney: authorized
General Rule: Strictly construed and strictly pursued; An agent by
held to grant only those specified powers estoppel has
Exception: when strict construction will destroy none of the rights An agent by
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Authority except where the appointment has
principal’s all the rights and
Art. 1873. If a person specially informs another or conduct are such liabilities of an
states by public advertisement that he has given that the agent agent, i.e. has
a power of attorney to a third person, the latter reasonably actual authority to
thereby becomes a duly authorized agent, in the believed that the act on behalf of
former case with respect to the person who principal intended the principal
received the special information, and in the latter him to act as an
case with regard to any person. agent
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instructions
Apparent Duty imposed
authority does upon the third
Art. 1874. When a sale of a piece of land or any
not terminate by party to inquire
interest therein is through an agent, the authority
Termination the mere makes
of the latter shall be in writing; otherwise, the sale
of Authority revocation of his termination of the
shall be void. (n)
authority without relationship as
Art. 1876. An agency is either general or special. notice to the third between the
The former comprises all the business of the party principal and
principal. The latter, one or more specific agent effective as
transactions. (1712) to such third party
unless the agency
Art. 1877. An agency couched in general terms has been
comprises only acts of administration, even if the entrusted for the
principal should state that he withholds no power purpose of
or that the agent may execute such acts as he contracting with
may consider appropriate, or even though the such third party
agency should authorize a general and unlimited
management. (n) Construction Merely advisory Strictly construed
of in nature as they limit the
Principal’s agent’s authority
Will an authority embodied in a letter be Instructions
sufficient?
Yes. (Jimenez v. Rabot, 38 Phil 387 [1918]) Agency Couched in General Terms: Covers only
MERE ACTS OF ADMINISTRATION even if:
Attorney-In-Fact: a. The principal should state that he withholds
 One who is given authority by his principal to no power
do a particular act not of a legal character b. The agent may execute such acts as he may
 The term is, in loose language, used to consider appropriate
include agents of all kinds, but in its strict c. The agency should authorize a general and
sense, it means an agent having a special unlimited management
authority created by a deed.
How are contracts of agency construed?
Distinctions between a General Agent and a  Contracts of agency, as well as general
Special Agent powers of attorney, must be interpreted in
General Agent Special Agent accordance with the language used by the
All acts Specific acts in parties.
Scope of connected with pursuance of  The real intention of the parties is primarily
Authority the business or particular determined from the language used and
employment in instructions or gathered from the whole instrument.
which he is with restrictions  In case of doubt, resort must be had to the
engaged necessarily situation, surroundings ad relations of the
implied from the parties. The intention of the parties must be
act to be done sustained rather than defeated.
Nature of Involves
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service one of which would uphold the intention while
Authorized service the other would overthrow it, the former is to
May bind his Can not bind his be chosen.
principal by an principal in a
Extent to act within the manner beyond or
Which scope of his outside the
Agent May authority specific acts
Bind the although it may which he is
Principal be contrary to the authorized to Art. Special powers of attorney are
latter’s special perform necessary in the following cases:
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1. To make such payments as are not

usually considered as acts of Powers Not Included in the Power to Mortgage:
administration; 1. To sell
2. To effect novations which put an end to 2. To execute a second mortgage
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obligations already in existence at the 3. To mortgage for the agent’s or any 3
time the agency was constituted; persons’ benefit, UNLESS clearly indicated
3. To compromise, to submit questions to
arbitration, to renounce the right to Powers Not Included in the Power to Compromise
appeal from a judgment, to waive Submission to Arbitration
objections to the venue of an action or to Rationale:
abandon a prescription already acquired;  A principal may authorize his agent to
4. To waive any obligation gratuitously; compromise because of absolute confidence
5. To enter into any contract by which the in the latter’s judgment and discretion to
ownership of an immovable is transmitted protect the former’s rights and obtain for him
or acquired either gratuitously or for a the best bargain in the transaction.
valuable consideration;  If the transaction would be left in the hands of
6. To make gifts, except customary ones for an arbitrator, said arbitrator may not enjoy
charity or those made to employees in the the trust of the principal.
business managed by the agent;
7. To loan or borrow money, unless the
latter act be urgent and indispensable for Art. 1881. The agent must act within the scope of
the preservation of the things which are his authority. He may do such acts as may be
under administration; conducive to the accomplishment of the purpose
8. To lease any real property to another of the agency. (1714a)
person for more than one year;
9. To bind the principal to render some Art. 1882. The limits of the agent's authority shall
service without compensation; not be considered exceeded should it have been
10. To bind the principal in a contract of performed in a manner more advantageous to the
partnership; principal than that specified by him. (1715)
11. To obligate the principal as a guarantor or
surety; Art. 1883. If an agent acts in his own name, the
12. To create or convey real rights over principal has no right of action against the
immovable property; persons with whom the agent has contracted;
13. To accept or repudiate an inheritance; neither have such persons against the principal.
14. To ratify or recognize obligations In such case the agent is the one directly
contracted before the agency; bound in favor of the person with whom he has
15. Any other act of strict dominion. (n) contracted, as if the transaction were his own,
except when the contract involves things
Art. 1879. A special power to sell excludes the belonging to the principal.
power to mortgage; and a special power to The provisions of this article shall be
mortgage does not include the power to sell. (n) understood to be without prejudice to the actions
between the principal and agent. (1717)
Art. 1880. A special power to compromise does
not authorize submission to arbitration. (1713a)
Requisites for Principal to be Bound by Act of
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Special Power of Attorney: an instrument in writing 1. The agent must act in behalf of the principal
by which one person, as principal, appoints another 2. The agent must act within the scope of his
as his agent and confers upon him the authority to authority
perform certain specified acts or kinds of acts on
behalf of the principal. When a principal NOT BOUND by act of agent:
 The special power of attorney can be 1. The agent acts without or beyond the
included in the general power when it scope of his authority in the former’s name
specifies therein the act or transaction for Exceptions:
which the special power is required. a. Where the acts of the principal have
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contributed to deceive a 3 person in consent or authority of the latter. Contracts entered
good faith; into in the name of another person by one who has
b. Where the limitations upon the power been given no authority or legal representation or
created by the principal could not who has acted beyond his powers are classified as
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have been known by the 3 person; unauthorized contracts and are declared
c. Where the principal has placed in the unenforceable, unless ratified.
hands of the agent instruments
signed by him in blank; Generally, the agency may be oral, unless the law
d. Where the principal has ratified the requires a specific form. A special power of attorney
acts of the agent is necessary for an agent to, as in this case, borrow
2. The a g e n t acts within the scope of his money, unless it is urgent and indispensable for the
authority but in his own name, EXCEPT preservation of the things which are under
when the transaction involves things administration. Since nothing in this case involves
belonging to the principal the preservation of things under administration, a
determination of whether Soriano had the special
authority to borrow money on behalf of respondent is
Jesus M. Gozun v. Jose Teofilo T. Mercado a.k.a.
in order.
‘Don Pepito Mercado,’ G.R. No. 167812 (19
December 2006) In the case at bar, there was not enough evidence
establishing that the loan was made on behalf of Don
Facts: Pepito. Gozun’s testimony, during trial, failed to
In the 1995 elections, Don Pepito vied for the categorically state whether the loan was on behalf of
gubernatorial post in Pampanga. The latter’s wife the respondent or his wife. The receipt signed by
transacted with Gozun, the owner of JMG Publishing Lilian was also in her name alone, without
House, for the printing of campaign paraphernalia. indicating that she was acting on behalf of Don
Don Pepito’s wife had told Gozun that the former has Pepito; she thus bound herself in her personal
already given his approval and that the latter could capacity and not as an agent of the respondent or
already start printing. Gozun thereafter availed of the anyone for that matter.
services of two other publishing houses to be able to
As to the issue on whether or not Gozun can collect
meet the deadline. The printed materials were then
the cost of the printing due to the other publishing
delivered to Don Pepito’s headquarters.
houses, the Court held that Gozun is the real party in
Meanwhile, Don Pepito’s sister-in-law, Lilian Soriano, interest insofar as the recovery of the cost of
obtained from Gozun a “cash advance” allegedly for campaign materials is concerned. The Court was not
the allowances of poll watchers. Lilian acknowledged persuaded by Don Pepito’s theory that the campaign
on petitioner’s 1995 Diary receipt of the amount materials delivered to him were donations from his
without thereby indicating that she was obataining friends and supporters; if so, such fact should have
such amount on behalf of Don Pepito. been printed on the face of the materials as required
by the Comelec rules.
Gozun sent a Statement of Account for the printing,
including the amount due the other publishing houses
plus the amount of the loan given to Lilia. Don NOTE: The agent is not deemed to have exceeded
Pepito’s wife made a partial payment to Gozun. the limits of his authority should he perform the
Despite repeated demands, respondent failed to agency in a manner more advantageous to the
settle the balance. Hence, a collection case was principal than that indicated by him, since he is
instituted by Gozun. authorized to do such acts as may be conducive to
the accomplishment of the purpose of the agency.
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Held: The loan obtained by Lilia cannot be collected

from Don Pepito, but the cost of campaign materials
is properly collectible.

CHAPTER 2: OBLIGATIONS OF THE AGENT

By the contract of agency, a person binds himself to
render some service or to do something in
representation or on behalf of another, with the
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Art. 1884. The agent is bound by his acceptance (1724a)

to carry out the agency, and is liable for the
damages which, through his non-performance, Art. 1897. The agent who acts as such is not
the principal may suffer. personally liable to the party with whom he
He must also finish the business already contracts, unless he expressly binds himself or
begun on the death of the principal, should delay exceeds the limits of his authority without giving
entail any danger. (1718) such party sufficient notice of his powers. (1725)

Art. 1885. In case a person declines an agency,

he is bound to observe the diligence of a good
father of a family in the custody and preservation
of the goods forwarded to him by the owner until Obligations of the Agent to the Principal
the latter should appoint an agent or take charge 1. General:
of the goods. (n) a. Act with utmost good faith & loyalty for
the furtherance of principal’s interests
Art. 1886. Should there be a stipulation that the b. Obey principal’s instructions
agent shall advance the necessary funds, he shall c. Exercise reasonable care
be bound to do so except when the principal is
insolvent. (n) 2. Specific:
a. Carry out the agency
Art. 1887. In the execution of the agency, the b. Answer for damages which through his
agent shall act in accordance with the non-performance the principal may suffer
instructions of the principal. c. Finish the business already begun on the
In default thereof, he shall do all that a good death of the principal should delay entail
father of a family would do, as required by the any danger (exception to the rule that
nature of the business. (1719) death extinguishes agency)
d. Observe the diligence of a good father in
Art. 1888. An agent shall not carry out an agency the custody and preservation of the
if its execution would manifestly result in loss or goods forwarded to him by the owner in
damage to the principal. (n) case he declines an agency, until an
agent is appointed
Art. 1889. The agent shall be liable for damages if, e. Advance necessary funds if there be a
there being a conflict between his interests and stipulation to do so (except when the
those of the principal, he should prefer his own. principal is insolvent)
(n) f. Act in accordance with the instructions of
the principal, and in default thereof, to do
Art. 1890. If the agent has been empowered to all that a good father of a family would do
borrow money, he may himself be the lender at Exceptions (to the rule that the agent
the current rate of interest. If he has been must not depart from the instructions of
authorized to lend money at interest, he cannot principal):
borrow it without the consent of the principal. (n) 1. There’s a sudden emergency
2. If the instructions are ambiguous
Art. 1891. Every agent is bound to render an 3. If the departure is so
account of his transactions and to deliver to the insubstantial that it does not
principal whatever he may have received by affect the result and the principal
virtue of the agency, QuickTime™ and a
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owing to the principal. g. Not to carry out the agency if it would
Every stipulation exempting the agent from the manifestly result in loss or damage to
obligation to render an account shall be void. the principal
(1720a) h. Answer for damages if there being a
conflict between his & principal’s
Art. 1896. The agent owes interest on the sums interests, he prefers his own
he has applied to his own use from the day on i. Not to loan to himself if he has been
authorized to loan money at interest
which he did so, and on those which he still
j. Render an account of his transactions
owes after the extinguishment of the agency.
and deliver to the principal whatever he
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may have received by virtue of the 3. When an agent by his act prevents
agency (If the agent fails to deliver and performance on the part of the principal
instead converts or appropriates for his 4. When a person acts as an agent without
own use the money or property authority or without a principal
belonging to his principal, he may be 5. A person who purports to act as agents of an
charged with ESTAFA.) incapacitated principal
k. Be responsible in certain cases for the
act of the substitute appointed by him
l. Pay interest on funds he has applied to Art. 1892. The agent may appoint a substitute if
his own use the principal has not prohibited him from doing
so; but he shall be responsible for the acts of the
Distinctions between Authority and the substitute:
Principal’s Instructions 1. When he was not given the power to
Authority Instructions appoint one;
Sum total of the powers Contemplates only a 2. When he was given such power, but
committed to the agent private rule of guidance without designating the person, and the
by the principal to the agent; person appointed was notoriously
independent and distinct incompetent or insolvent.
in character All acts of the substitute appointed against the
Relates to the Refers to the manner or prohibition of the principal shall be void. (1721)
subject/business with mode of agent’s action
which the agent is Art. 1893. In the cases mentioned in Nos. 1 and 2
empowered to deal or act of the preceding article, the principal may
Limitations of authority Without significance as furthermore bring an action against the substitute
are operative as against against those with with respect to the obligations which the latter
those who have/charged neither knowledge nor has contracted under the substitution. (1722a)
with knowledge of them notice of them
Contemplated to be Not expected to be made
made known to third known to those with Appointment of Sub-agent:
persons dealing with the whom the agent deals 1. If the principal has not prohibited the agent from
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agent appointing a substitute, he will be liable to 3
persons for the acts of the sub-agent within the
When agent has a right to disobey the principal’s scope of his authority
instructions: 2. If there is a prohibition but nevertheless the agent
1. When the instruction calls for the appoints a subagent, all the subagent’s acts are
performance of illegal acts void as to the principal.
2. Where he is privileged to do so to protect his 3. If there is authority to appoint and subagent is not
security in the subject matter of the agency designated by the principal, the agent will be
liable for all the acts of the subagent if the
When obligation to account not applicable: subagent is notoriously incompetent or insolvent.
1. If the agent acted only as a middleman with 4. If there is authority to appoint and subagent is
the task of merely bringing together the designated by the principal, the agent is released
vendor and the vendees. from any liability from the acts of the subagent.
2. If the agent had informed the principal of the 5. If the appointment of a sub-agent is not
gift/bonus/profit he received from the authorized but not prohibited, it shall be valid if it
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see this picture.
thereto. principal incur damage due to such appointment,
3. Where a right of lien exists in favor of the the agent shall be primarily responsible for the
agent. acts of the substitute.

When agent may incur personal liability?

1. When the agent expressly binds himself Art. 1894. The responsibility of two or more
2. When the agent exceeds his authority agents, even though they have been appointed

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simultaneously, is not solidary, if solidarity has or the instructions as regards the agency. Private
not been expressly stipulated. (1723) or secret orders and instructions of the principal
do not prejudice third persons who have relied
Art. 1895. If solidarity has been agreed upon, upon the power of attorney or instructions shown
each of the agents is responsible for the non- them. (n)
fulfillment of agency, and for the fault or
negligence of his fellows agents, except in the Art. 1909. The agent is responsible not only for
latter case when the fellow agents acted beyond fraud, but also for negligence, which shall be
the scope of their authority. (n) judged with more or less rigor by the courts,
according to whether the agency was or was not
for a compensation. (1726)
Responsibility of 2 or More Agents Appointed
Simultaneously:
rd
General Rule: Liable jointly Effect where 3 person aware of limits of agent’s
Exception: Solidarity has been expressly power: If the agent exceeds his authority, it shall be
stipulated; each of the agents becomes solidarily VOID unless the principal ratifies it.
liable for (1) the non-fulfillment of the agency; of
for (2) the fault or negligence of his fellow agent DOCTRINE OF AGENCY BY NECESSITY: actually,
Exception to the exception: when one of an agency can never be created by necessity; what is
the other agent/s acts beyond the scope of created is additional authority in an agent appointed
his authority – innocent agent is NOT liable and authorized before the emergency arose. The
existence of emergency or other unusual conditions
may operate to invest in an agent authority to meet
Art. 1898. If the agent contracts in the name of the the emergency, provided: (PURE)
principal, exceeding the scope of his authority, 1. The agent’s enlarged authority is exercised
and the principal does not ratify the contract, it for the principal’s protection
shall be void if the party with whom the agent 2. The agent is unable to communicate with
contracted is aware of the limits of the powers principal;
granted by the principal. In this case, however, 3. The means adopted are reasonable under
the agent is liable if he undertook to secure the the circumstances;
principal's ratification. (n) 4. The emergency really exists;
rd
Art. 1899. If a duly authorized agent acts in When 3 person repudiate the contract
accordance with the orders of the principal, the  Before actual ratification by the principal, or
latter cannot set up the ignorance of the agent as before the principal has signified his willingness
to circumstances whereof he himself was, or to ratify the agent’s acts.
ought to have been, aware. (n)
Effect of the principal receiving the benefits of
Art. 1900. So far as third persons are concerned, the transaction:
an act is deemed to have been performed within  He is deemed to have ratified it. A principal may
the scope of the agent's authority, if such act is not accept the benefits of a transaction and at the
within the terms of the power of attorney, as same time repudiate its burdens
written, even if the agent has in fact exceeded the
limits of his authority according to an Conditions for Ratification
understanding between the principal and the
QuickTime™ and a
1. The principal must have capacity and power
agent. (n) TIFF (Uncompressed) decompressor
are needed to see this picture.
to ratify
2. He must have had knowledge of material
Art. 1901. A third person cannot set up the fact facts
that the agent has exceeded his powers, if the 3. He must ratify the acts in its entirety
principal has ratified, or has signified his 4. The act must be capable of ratification
willingness to ratify the agent's acts. (n) 5. The act must be done in behalf of the
principal
Art. 1902. A third person with whom the agent  To be effective, ratification need not be
wishes to contract on behalf of the principal may communicated or made known to the
require the presentation of the power of attorney, agent or the third party. The act or

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conduct of the principal rather than his

communication is the key. But before Robinson v. Borse
ratification, the third party is free to Ratification is spelled out when the principal brings
revoke the unauthorized contract. legal proceedings to enforce the contract entered into
by the unauthorized agent, subject to qualification,
Effects of Ratification however, that the bringing of legal proceedings is not
1. With respect to agent - relieves the agent from deemed ratification where the principal’s action is
liability to the third party for the unauthorized undertaken to avert a greater loss rather than to
transaction, and to his principal for acting without assert a gain.
authority; may recover compensation
2. With respect to principal - assumes
responsibility for the unauthorized act, as fully as
if the agent had acted under original authority but NOTE: Agent always liable for fraud but not for
not liable for acts outside the authority approved negligence, which shall be judged with more or less
by his ratification rigor by the courts, according to whether the agency
rd
3. With respect to 3 persons - bound by was or was not for compensation.
ratification to the same extent as if the ratified act
had been authorized; cannot raise the question
of the agent’s authority to do the ratified act
4.
Acts of the Agent Effect Exception(s)
1. Binds principal; Agent liable if he:
In behalf of the principal, 2. Agent not personally liable 1. Expressly makes himself liable
within the scope of authority 2. Exceeds the limits of his authority
without giving the parties sufficient
notice of his powers
Binding on the principal when:
Contract is unenforceable as against
Without or beyond scope of 1. Ratified or
the principal but binds the agent to
authority 2. The principal allowed the agent to act
the third person
as though he had full powers
When the transaction involves things
Within the scope of authority 1. Not binding on the principal; belonging to the principal:
but in the agent’s name 2. Principal has no cause of action 1. Remedy of the principal - damages for
rd
against the 3 parties and vice agent’s failure to comply with the
versa agency
2. Remedies of the third person
• If the case falls under the general rule,
he can sue the agent.
• But when the contract involves things
belonging to the principal, he can sue
the principal.
• But if it cannot be determined without
litigation who is liable, he can sue both.
rd
Within the scope of the 1. Insofar as 3 persons are
QuickTime™ and a
written power of attorney but d compressor
TIFF (Uncompressed) e concerned (not required to
are needed to see thi s picture.
agent has actually exceeded inquire further than the terms of
his authority according to an the written power, agent acted
understanding between him & within scope of his authority;
the principal 2. Principal estopped
1. Third person knew agent was acting for
With improper motives Motive is immaterial; as long as his own benefit: principal is not liable to
rd
within the scope of authority, valid 3 third person
2. Owner is seeking recovery of personal
property of which he has been

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unlawfully deprived
1. Authorized - principal still liable
2. Beyond the scope of the agent’s
With misrepresentations by authority
the agent General Rule: Principal not
liable
Exception: principal takes
advantage of a contract or
receives benefits made under
false representation of his
agent
3. For the agent’s own benefit –
principal still liable; agent’s motive
immaterial
1. Principal still responsible for the
Mismanagement of the acts contracted by the agent
rd
business by the agent with respect to 3 persons;
2. Principal, however, may seek
recourse from the agent
Principal civilly liable so long as the
Tort committed by the agent tort is committed by the agent while
performing his duties in furtherance
of the principal’s business
Agent in good faith but Principal is liable for damages
rd
prejudices 3 parties
Agent in bad faith and Only the agent is liable for damages
rd
prejudices 3 persons

Art. 1903. The commission agent shall be

responsible for the goods received by him in the
terms and conditions and as described in the
consignment, unless upon receiving them he
should make a written statement of the damage
and deterioration suffered by the same. (n)

Art. 1904. The commission agent who handles

goods of the same kind and mark, which belong
to different owners, shall distinguish them by
countermarks, and designate the merchandise
respectively belonging to each principal. (n)

Art. 1905. The commission agent cannot, without

the express or implied consent of the principal,
sell on credit. Should he do so, the principal may
QuickTime™ and a
demand from him payment
TIFF (Uncompressed) in cash, but the
decompressor
are needed to see this picture. Commission Agent: One whose business is to
commission agent shall be entitled to any receive and sell goods for a commission and who is
interest or benefit, which may result from such entrusted by the principal with the possession of
sale. (n) goods to be sold, and usually selling in his own
name.
Art. 1906. Should the commission agent, with
authority of the principal, sell on credit, he shall
so inform the principal, with a statement of the
names of the buyers. Should he fail to do so, the
sale shall be deemed to have been made for cash

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Distinction between Ordinary Agent & Art. 1910. The principal must comply with all the
Commission Agent obligations which the agent may have contracted
Ordinary Agent Commission Agent within the scope of his authority.
Acts for and in behalf of May act in his own name As for any obligation wherein the agent
his principal or in that of the principal has exceeded his power, the principal is not
Need not have Must be in possession of bound except when he ratifies it expressly or
possession of the the thing he disposes tacitly. (1727)
principal’s goods

Art. 1912. The principal must advance to the

Distinctions between Commission Agent & agent, should the latter so request, the sums
Broker necessary for the execution of the agency.
Commission Agent Broker Should the agent have advanced them, the
Engaged in the purchase No custody or principal must reimburse him therefor, even if the
and sale for a principal of possession of the thing business or undertaking was not successful,
personal property which he disposes; merely a provided the agent is free from all fault.
has to be placed in his go-between, an The reimbursement shall include interest on
possession and disposal intermediary between the the sums advanced, from the day on which the
seller and the buyer advance was made. (1728)

Has a relation with Maintains no relation with Art. 1913. The principal must also indemnify the
principal, buyer or seller, the thing which he agent for all the damages which the execution of
and property which is the purchases or sells the agency may have caused the latter, without
object of the transaction fault or negligence on his part. (1729)

Obligations of a Commission Agent: Art. 1915. If two or more persons have appointed
an agent for a common transaction or
1. Responsible for the goods received by him, as
undertaking, they shall be solidarily liable to the
described in the consignment, UNLESS upon
agent for all the consequences of the agency.
receiving them he should make a written
(1731)
statement of the damage and deterioration
suffered by the same Art. 1916. When two persons contract with regard
2. If goods are of the same kind and mark but to the same thing, one of them with the agent and
belonging to different owners, make a the other with the principal, and the two contracts
distinction by counter marks and designate the are incompatible with each other, that of prior
merchandise respectively belonging to each date shall be preferred, without prejudice to the
principal cannot, without consent of the provisions of Article 1544. (n)
principal, sell on credit; should he do, principal
may demand payment in cash, but the Art. 1917. In the case referred to in the preceding
commission agent entitled to any article, if the agent has acted in good faith, the
interest/benefit which may result from such principal shall be liable in damages to the third
sale person whose contract must be rejected. If the
3. If an agent receiving guarantee commission (a agent acted in bad faith, he alone shall be
del credere agent), bears the risk of collection
responsible. (n)
and pay the principal the proceeds of the sale
on the same teQrm uicks
Timea
™garned ea d upon with the
purchaser lTiIaFFare
b(Uleneeded
ncompressed) decompressor
for todsee
am a g e s if agent does not
this picture.
Obligations of the Principal to the Agent:
collect the credits of his principal at the time
when they become due and demandable, 1. Comply with all the obligations agent
UNLESS he proves, that he exercised due contracted in representation of the principal
diligence for that purpose. 2. Advance sums necessary for the execution
of the agency, when agent so requests; liable
for reimbursement regardless of the
CHAPTER 3: OBLIGATIONS OF THE PRINCIPAL undertaking’s success whenever agent had
advanced & has no fault; includes interest
3. Reimburse the agent for all advances made

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by him provided the agent is free from fault

4. Indemnify the agent for all the damages
which the execution of the agency may have Art. 1914. The agent may retain in pledge the
caused the latter without fault or negligence things which are the object of the agency until
on his part the principal effects the reimbursement and pays
5. Pay the agent the compensation agreed the indemnity set forth in the two preceding
upon or the reasonable value of the latter’s articles. (1730)
services
rd
Liability of 3 persons to the Principal: Agent’s Right of Retention:
rd
1. In Contract – a 3 person is liable to the 1. Specific (only for those goods connected with
principal upon contracts entered into by his the agency) and
agent, as if the contract has been entered into by 2. Until the principal effects the reimbursement
the principal. and pays the indemnity
rd
2. In Tort – the 3 person’s tort liability to the
principal, insofar as the agent is involved in the
tort, arises in 3 situations: Art. 1918. The principal is not liable for the
rd
a. Where the 3 person damages or expenses incurred by the agent in the following
injures property or interest of the principal in cases:
the possession of the agent 1. If the agent acted in contravention of the
rd
b. Where the 3 person colludes with the principal's instructions, unless the latter
agent to injure/defraud the principal should wish to avail himself of the
rd
c. Where the 3 person induces the agent benefits derived from the contract;
to violate his contract with the principal to 2. When the expenses were due to the fault
betray the trust reposed upon him by the of the agent;
principal. 3. When the agent incurred them with
knowledge that an unfavorable result
Requisites for solidary liability of principals: would ensue, if the principal was not
1. There are 2 or more principals aware thereof;
2. The principals have all concurred in the 4. When it was stipulated that the expenses
appointment of the same agent would be borne by the agent, or that the
3. The agent is appointed for a common transaction latter would be allowed only a certain
or undertaking sum. (n)
Note: The rule in Art. 1915 applies even when the
appointments were made by the principals in
Principal’s Liability for Expenses:
separate acts, provided that they are for the same
General Rule: Principal is liable for the expenses
transaction. The solidarity arises from the common
incurred by the agent
interest of the principals and not from the act of
Exceptions: (AFUS)
constituting the agency.
a. If the agent acted in contravention of the
principal's instructions, unless principal
Rule where 2 persons contract separately with
derives benefits from the contract
agent and principal
b. When the expenses were due to the fault
Two persons may contract separately with
of the agent
the agent and the principal with regard to the same
c. When the agent incurred them with
thing. If the two TIFF
contra QucictksTimea™reand aincompatible with
(Uncompressed) decompressor knowledge that an unfavorable result
each other, the oneareonefedpedritosreedthais tpeictusre.hall be preferred.
would ensue, if the principal was not
This is subject, however, to the rules under Article
1 aware thereof
1544 of the Civil Code (Double Sale).

Should it be immovable property, the ownership

shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
1
Art. 1544. If the same thing should have been sold to Should there be no inscription, the ownership shall
different vendees, the ownership shall be transferred to the pertain to the person who in good faith was first in the
person who may have first taken possession thereof in possession; and, in the absence thereof, to the person who
good faith, if it should be a movable property. presents the oldest title, provided there is good faith.
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d. When it was stipulated that the expenses beginning

would be borne by the agent, or that the Substance of ratification Substance of estoppel is
latter would be allowed only a certain is confirmation of an the principal’s
sum authorized acts or inducement to another to
conduct after it has been act to his prejudice
done
Art. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the Distinction between Apparent Authority &
agent if the former allowed the latter to act as Authority by Estoppel
though he had full powers. (n) Apparent Authority Authority by Estoppel
Though not actually Where the principal, by
granted, principal his negligence, permits
Who can be estopped to deny agency? knowingly permits/holds his agent to exercise
1. Estoppel of Agent- one professing to act as out the agent as powers not granted to
agent estopped to deny his agency both as possessing the him, even though the
against his asserted principal and the third necessary powers to act principal may have no
persons interested in the transaction in which he in a certain way notice or knowledge of
is engaged the conduct of the agent
2. Estoppel by the Principal
a. As to agent – one knowing another is
acting as his agent and fails to repudiate
his acts, or accept the benefits of them, CHAPTER 4: MODES OF EXTINGUISHING
will be estopped to deny the agency as AGENCY
against such other
b. As to sub-agent – for the principal to be Agency is Extinguished: (EDWARD)
estopped from denying his liability to a 1. By the expiration of the period for which the
third person, he must have known or be agency was constituted.
charged with knowledge of the 2. By the death, civil interdiction, insanity or
transaction and the terms of the insolvency of the principal or of the agent;
agreement between the agent and sub- 3. By the withdrawal of the agent;
agent 4. By the accomplishment of the object or
c. As to third persons – one who knows that purpose of the agency;
another is acting as his agent or 5. By its revocation;
permitted another to appear as his agent, 6. By the dissolution of the firm or corporation
to the injury of third persons who have which entrusted or accepted the agency(Art.
dealt with the apparent agent as such in 1919)
good faith and in the exercise of
reasonable prudence, is estopped to  The list not exclusive; causes particular only to
deny the agency agency; may be extinguished by the modes of
3. Estoppel of Third Persons – a third person, extinguishment of obligations in general
having dealt with one as an agent may be whenever they are applicable, like loss of the
estopped to deny the agency as against the thing and novation
rd
principal, agent or 3 persons in interest  Agency is TERMINATED, as a matter of law,
4. Estoppel of the Government - government upon the outbreak of war.
neither estopped by the mistake/error of its
QuickTime™ a nd a
agents; may be TIFFesto pped tdecompressor
(Uncompressed) hrough affirmative acts Presumption of Continuance of Agency
are needed to see this picture.
of its officers acting within the scope of their  It means that when once shown to have existed,
authority an agency relation will be presumed to have
continued, in the absence of anything to show its
termination.
Distinction between Ratification and Estoppel Continuance of Agency
Ratification Estoppel Parties must be
Rests on intention Rests on prejudice 1. Present,
Affects the entire Affects only relevant 2. Capacitated and
transaction from the parts of the transaction 3. Solvent
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in good faith. (1738)

Modes of extinguishing an agency, generally:
1. Agreement
2. Subsequent acts of the parties which may be Exceptions to Extinguishment by Death
either: 1. If the agency is coupled with an interest
a. By the act of both parties or by 2. If the act of the agent was executed without
mutual consent the knowledge of the death of the principal
b. By the unilateral act of one of them and the third person who contracted with the
3. By operation of law agent acted in good faith
3. To avoid damage
Note: Even if the reason for extinguishing the 4. If it has been constituted in the common
agency is not true, the agent cannot insist on interest of the principal and of the agent, or in
reinstatement. The agent can only demand the interest of a third person who has
damages. accepted the stipulation in his favor

What happens of the subject matter of the agency

is lost or destroyed? Art. 1932. If the agent dies, his heirs must notify
In the absence of any agreement by the the principal thereof, and in the meantime adopt
parties to the contrary, the loss or destruction of the such measures as the circumstances may
subject matter of the agency terminates the agent‘s demand in the interest of the latter. (1739)
authority to deal with reference to it
Exceptions:
1. if it is possible to substitute other material
Can the heirs continue the agency?
for that which was destroyed without
General Rule: agency calls for personal services on
substantial detriment to either party
the part of the agent; rights & obligations are not
2. if the destroyed subject matter was not in
transmissible
fact essential to the contract
Exceptions:
3. a partial loss or destruction
a. Agency by operation of law, or a
presumed or tacit agency
Form of renunciation:
b. Agency is coupled with an interest in
It is not always necessary for the agent to
the subject matter of the agency (ex.
renounce the agency expressly. He can do so
power of sale in a mortgage).
impliedly, such as:
1. where he has conducted himself in a manner
Exceptions to Extinguishment Upon Loss or
incompatible with his duties as agent
Destruction of Subject Matter
2. when he abandons the object of his agency
1) If it is possible to substitute other material for that
and acts for himself in committing a fraud
which was destroyed without substantial
upon his principals
detriment to either party or if the destroyed
3. when he files a complaint against the
subject matter was not in fact essential to the
principal and adopts an antagonistic attitude
contract;
towards him
2) A partial loss or destruction does not always
result in a complete termination of the agency,
and under such circumstances, while the agency
Art. 1930. The agency shall remain in full force may be ended in so far as the destroyed property
and effect even after the death of the principal, if is concerned, it may continue in existence as to
QuickTime™ and a
it has been constituted in the
TIFF (Uncompressed) common interest of
decompressor other property not affected
are needed to see this picture.
the latter and of the agent, or in the interest of a i) If the loss brought about by the principal
third person who has accepted the stipulation in (ex.. principal sells subject matter to
his favor. (n) another party even if an agent has been
constituted in reference to it), principal
Art. 1931. Anything done by the agent, without liable for damages for his wrongful
knowledge of the death of the principal or of any terminating act; if subject matter is lost
other cause which extinguishes the agency, is without principal’s fault, no liability
valid and shall be fully effective with respect to assumed by him
third persons who may have contracted with him

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Change of Circumstance:
General Rule: when there is a basic change in the Art. 1926. A general power of attorney is revoked
circumstances surrounding the transaction, which as by a special one granted to another agent, as
not contemplated by the parties and which would regards the special matter involved in the latter.
reasonably lead the agent to believe that the principal (n)
would not desire him to act, the authority of the agent
is terminated Art. 1927. An agency cannot be revoked if a
Exceptions: bilateral contract depends upon it, or if it is the
a. If the original circumstances are restored means of fulfilling an obligation already
within a reasonable period of time, the contracted, or if a partner is appointed manager
agent's authority may be revived of a partnership in the contract of partnership
b. Where the agent has reasonable doubts and his removal from the management is
as to whether the principal would desire unjustifiable. (n)
him to act, his authority will not be
terminated if he acts reasonably Art. 1928. The agent may withdraw from the
c. Where the principal and agent are in agency by giving due notice to the principal. If
close daily contact, the agent's authority the latter should suffer any damage by reason of
to act will not terminate upon a change of the withdrawal, the agent must indemnify him
circumstances if the agent knows the therefor, unless the agent should base his
principal is aware of the change and withdrawal upon the impossibility of continuing
does not give him new instructions the performance of the agency without grave
detriment to himself. (1736a)

Art. 1920. The principal may revoke the agency at Art. 1929. The agent, even if he should withdraw
will, and compel the agent to return the document from the agency for a valid reason, must continue
evidencing the agency. Such revocation may be to act until the principal has had reasonable
express or implied. (1733a) opportunity to take the necessary steps to meet
the situation. (1737a)
Art. 1921. If the agency has been entrusted for the
purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they Revocation: Termination of the agency by the
were not given notice thereof. (1734) subsequent act of the principal

Art. 1922. If the agent had general powers, Renunciation/Withdrawal: Termination of the
revocation of the agency does not prejudice third agency by the subsequent act of the agent
persons who acted in good faith and without
knowledge of the revocation. Notice of the May the agency be extinguished at will?
revocation in a newspaper of general circulation
is a sufficient warning to third persons. (n) A. AGENT may do so but subject to the contractual
obligations owing the principal (i.e. fixed period of
Art. 1923. The appointment of a new agent for the time for the agency or purpose not yet
same business or transaction revokes the accomplished);
previous agency from the day on which notice 1. Expressly or impliedly
thereof was given to the former agent, without a. conducted himself in a manner
prejudice to the provisions of the two preceding incompatible with his duties;
QuickTime™ and a
articles. (1735a) TIFF (Uncompressed) decompressor b. abandons the object of agency and acts
are needed to see this picture.
for himself in committing a fraud upon his
Art. 1924. The agency is revoked if the principal principal;
directly manages the business entrusted to the c. he files a complaint against the principal
agent, dealing directly with third persons. (n) and adopts an antagonistic attitude
towards him
Art. 1925. When two or more principals have  with just cause - give due notice
granted a power of attorney for a common  without just cause - liable for
transaction, any one of them may revoke the damages if agent suffers
same without the consent of the others. (n) damages thereby UNLESS the

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agent should base his withdrawal

upon the impossibility of Necessity of Notice of Revocation
continuing the performance of 1. As to the agent - express notice always
the agency without grave necessary; sufficient notice if the party to be
detriment to himself notified actually knows, or has reason to know, a
2. The mere fact that the agent violates his fact indicating that his authority has been
instructions does not amount to renunciation, terminated/suspended; revocation without notice
and although he may thus render himself to the agent will not render invalid an act done in
liable to the principal, he does not cease to pursuance of the authority
rd
become an agent. 2. As to 3 persons – express notice necessary
3. As to former customers - actual notice must be
B. PRINCIPAL may also revoke the agency at will given to them because they always assume the
Exception: agency coupled with interest continuance of the agency relationship
a. When a bilateral contract depends 4. As to other persons - notice by publication is
upon the agency enough
b. When the agency is the means of
fulfilling an obligation already Effect of Extinguishment Without Notice
 Act of agent deemed valid insofar as 3 parties
rd
contracted
c. When a partner is appointed as acting in good faith and without knowledge of
manager of a partnership in the revocation
contract of partnership and his
removal from the management is
unjustifiable.
Exception to the exception: when the
agent acts to defraud the principal

Implied Revocation of Agency

1. Principal appoints a new agent for the same
business or transaction, only if there is
incompatibility); effective as between the principal
and the agent only if communicated to the agent;
does not prejudice rights of third persons acting
in good faith without knowledge of the revocation
2. Principal directly manages the business
rd
entrusted to the agent, dealing directly with 3
persons

Effect of Issuance of a Special Power of Attorney:

 The general power is impliedly revoked as to
matters covered by the special power because a
special power naturally prevails over a general
power.

Principal’s Liability for Damages despite

Revocation:
QuickTime™ and a
1. If the agency w as cdecompressor
TIFF (Uncompressed) onstituted for a fixed
period, the principa l shall be liable for
are needed to see this picture.

damages occasioned by the wrongful

discharge of the agent before the expiration
of the period fixed
2. Even if there was no time fixed for the
continuance of the agency, but the agent can
prove that the principal acted in bad faith by
revoking the agency in order to avoid the
payment of commission about to be earned,
the principal can be held liable for damages
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