AGENCY

Agency is where a person binds himself to render

service or to do something IN REPRESENTATION of
another, with the latter’s consent or authority.

Nature of Agency

1. Agent acts as representative and not for himself.

2. Agency acts within scope of his authority.

Elements of contract of agency

1. Consent of the principal and agent.

2. Object: execution of a juridical act in relation to
third parties.
3. Consideration: either commission or liberality.

Characteristics of agency contract

1. Nominate, principal
2. Consensual
3. Unilateral and generally onerous
4. Preparatory and representative
5. Fiduciary and revocable
(Neither the principal nor the agent can be forced to
remain in the relationship when they choose to have it
terminated.)

Consequences of fiduciary relationship

1. Agent estopped from asserting adverse titled over

SM of agency belonging to the principal.
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2. Must choose best course of action for the principal,
and not one that favors himself to the detriment of the
principal.
3. Cannot acquire for himself property of the principal
entrusted for disposition.

Express Agency vs. Implied Agency

Express agency – there is ACTUAL ACCEPTANCE.

Implied agency – Implied from:

1. Acts of principal
2. Silence or lack of action
3. His failure to repudiate the agency, knowing that a
person is acting on his behalf without authority.
4. Principal delivers power of attorney to the agent
and he accepts it without objection – if both are in the
same place, physically present.
NB: But if not physically present in the same place, as
when the power is delivered through mail, silence is
not implied acceptance.
XPNS:
1. Principal transmits power of attorney to the agent
who receives it without objection.
2. Principal entrusts to the agent by letter or telegram
a power of attorney with respect to the business in
which the latter is habitually engagedin, and he did
not reply.

Agency by Estoppel

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When one led other to believe that he is an agent
when in fact he is not, the person is estopped to deny
such fact anymore.

* Even if the agent has exceeded his powers, the

principal should be made liable if he allowed the agent
to act as though he had full powers.

Elements of Agency by Estoppel

1. Principal manifested a representation of the agent’s

authority.
2. Third person in GF relied on the representation.
3. Third person changed his position, to his detriment,
relying on the representation.

* Authority of agent must be in writing.

General Agency vs. Special Agency

General agency – is one that encompasses all of the

business of the principal (Universal Agency) (Agency
couched in general terms) Involves acts of
administration only not acts of dominion.

Special agency – is one which will cover only one or

more specific transactions. (Particular agency)
(Agency couched in specific terms)

On death of the principal

GR: It terminates the agency.

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XPN: The agent must finish the business already
began prior to the principal’s death, should delay
entail any danger.

General obligation of the agent who accepts the

agency

Legally bound to carry out the terms of the agency.

In case of breach, the principal can sue for damages,

but he cannot compel agent specific performance
because it does not apply to obligations to do.

GR: Agent is not liable for contracts he enters.

XPN: 1. He exceeds authority. (Principal may ratify, if

not unenforceable as against the principal.)
2. He binds himself to the contract personally.

XPN to the XPN: When the third person was aware

that the agent exceeded his powers, the contract is
unenforceable even between the agent and the third
person. (in pari delicto)

When agent is empowered to sell his principal’s

property, he cannot purchase for himself (As
provided in Art. 1491)

When an agent is empowered to borrow or lend

money, he may transact with himself

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1. If empowered to borrow, he may be the
lender at the current interest, or else, liable for return
of difference.

2. If empowered to lend, he may not borrow

without the principal’s consent or else liable for
DAMAGES.

When agent acts in his own name

The principal has not right of action against the third

persons, neither do the third persons have right of
action against the principal.

XPNS:

1. When the transaction involves the things of the

principal. In this case, the principal is bound.
2. When the principal ratifies the contract or derives
benefit from it.

Remedy of the principal: DAMAGES

Duty of Loyalty and Art 1891 – When an agent

enters into a contract in his own name on a matter
that falls within the scope of the agency, he is bound
to render an account of his transactions and deliver to
the principal what he received by virtue of the agency
even if it may not be owing to the principal.

When agent can appoint a sub-agent

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I the principal did not prohibit him from doing so.
Effect: Sub-agent is agent of principal too. Agent is
responsible for the acts of the sub-agent when:

a. He was not given power to appoint one

b. He was allowed, but the one chosen was notoriously
incompetent/insolvent.

* If the principal expressly prohibits the appointment

of a sub-agent:
a. All acts of sub-agent are void as to the principal
b. The agent is responsible personally for the
contracts entered into by the sub-agent.

Scope of powers of an agent in general

General powers: Only acts of administration

 Even if the principal provides that the agency

may do whatever he deems appropriate, or even
if the agency authorizes general and unlimited
management.

What need SPA (Acts of strict dominion)

1. Making payments not considered as acts of

administration.
2. Effect novation of obligations.
3. Compromise, submit to arbitration, renounce right
to appeal, waive objections, renounce prescription.
4. Waive obligations gratuitously.
5. Transfer of immovable. (whether onerous or
gratuitous)
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6. Make non-customary gifts.
7. Loan or borrow money. (Unless urgently needed to
preserve a thing under administration)
8. Lease for more than 1 year.
9. Contract for principal to perform service without
compensation.
10. Bind principal in partnership contract.
11. Obligate principal as guarantor or surety.
12. Convey or create rights over real property.
13. Accept or repudiate inheritance.
14. Ratify or recognize obligations contracted before
agency.
15. Other acts of strict dominion.

Technically SPA need not be in writing, except sale of

piece of land which for validity must be in writing or
else, VOID.

Rights and obligations of the principal

1. The principal in not bound by contracts entered into

by the agent without or outside scope of authority,
EXCEPT:
a. If he ratified it expressly or tacitly.
b. Principal allowed agent to act as if he had full
authority.
c. Principal revoked agency but the third party acted
in GF without such notice o revocation.

2. Principal is liable for torts committed by the agent

within the scope of authority.

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3. Principal must advance sums necessary for the
agency if the agent requests. If the agent paid for it
first, the principal must reimburse.

4. Principal NOT liable for expenses of agent if:

a. Outside the scope of authority
b. Incurred due to agent’s fault
c. Agent incurred them with knowledge of unfavorable
result, if the principal was not aware thereof.
d. Express stipulation

5. Must indemnify agent for damages sustained

without agent’s fault.

6. Pay agent for his services.

7. If two or more principals constituted the same

agent for a common undertaking, they are solidarily
liable. (as opposed to constituting two agents by the
same persons, the usual rule is joint liability, not
solidary liability as between the agents.)

Irrevocable Agency

GR: An agency is revocable at will

XPNS:

1. A bilateral contract depends upon it.

2. It is the means of fulfilling an obligation already
contracted.
3. A partner is appointed managing partner and there
is no just cause.
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4. Agency coupled with interest.

Extinguishment of Agency

1. Revocation – even if it is irrevocable for a definite

term or period, the principal just pays damages to
agent for damages caused if any.

Implied revocation – appointing a new agent for the

same business, or the principal directly manages the
business, or by granting a SPA as regard the same
business to another agent, where he previously
granted a GPA to one agent.

2. Withdrawal of agent
3. Death, civil interdiction, insanity, or
insolvency of principal or agent.

When an agency remain in full force

notwithstanding death of the principal

1. constituted in common interest of the principal and

agent.

2. There is stipulation pour atrui which has been

accepted.

3. Agent did not know the principal was dead and third
party was in GF.

* IF the third party was in BF, void for lack of consent,

an essential element.

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4. Dissolution of juridical entity which entrusted or
accepted the agency.

5. Accomplishment of purpose or object of agency.

6. Expiration of period of agency.

COMPROMISE

It is a contract where parties make reciprocal

concessions (amicable settlement) to put an end to
litigation or avoid it altogether.

Matters which cannot be compromised

1. Civil status of person

2. Validity of marriage or legal separation
3. Ground for legal separation
4. Future support
5. Jurisdiction of courts
6. Future legitime

Effect of compromise – it has the effect of res

judicata between the parties. If the one party does not
want to comply with the compromise, the other party
may:

1. Enforce the compromise; or

2. Rescind the compromise and insist on his original
demand.

LEASE
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Lease is a consensual, bilateral, onerous and
commutative contract where one person binds himself
to grant temporary use of a thing or render some
service to another, who pays compensation.

Lease of service vs. Lease of things

Lease of Service Lease of Thing

one party binds himself one party binds himself

to execute a piece of to give to another the
work or render some enjoyment or use of a
service for a price thing for a price
certain. certain, whether for a
definite or indefinite
period. (consensual
and onerous. Not a
personal contract
therefore death of
party will not auto-
extinguish the
contract.

The object is some The object is a thing

service
The principal obligation The principal obligation
is to perform some of the lessor is to
service. deliver the thing leased
to the lessee.

Remedy is DAMAGES Remedy is SPECIFIC

PERFORMANCE.
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Lease of rural and urban lands

* The lessee may not assign the lease without the

lessor’s consent.

* The lessee may sublease the property even without

the lessor’s consent. But the lessee must still comply
with his responsibility to perform the contract toward
the lessor.

The lessor may hold the sublessee for rent due from
the lessee (Accion Directa) But the sublessee cannot
be held liable beyond the amount due from him under
the sublease.

Nature of sublease agreement

It must comply with the lease agreement as to the

manner of use and preservation of the thing. And so, if
the lease agreement provides that the property must
only be residential, the sublease cannot be for the use
of the property as commercial area.

* The warranties applicable to sale like warranty for

hidden defects also apply to lease, even if the lessor
was not aware of such defects.

* Persons who are disqualified to enter in a contract of

sale are also disqualified to enter into a contract of
lease.
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Obligations of the lessor

1. Deliver the thing, which must be fit for the use

intended.
2. To make necessary repairs on the thing to keep it fit
for such use. (Unless provided otherwise)
3. Maintain the lessee in peaceful and adequate
enjoyment of the lease during the contract.

Obligations of the lessee

1. Pay the price of lease.

2. Use the thing leased with diligence of GFF, devoting
it to use stipulated (or according to nature of the thing
if none is stipulated.)
3. Pay expenses for deed of lease.
4. Return the thing after expiration of lease.
5. Observe the terms provided by the lessor.

Remedy for breach by either party

1. Rescission with damages

2. Damages alone and allow contract to continue.

When thing leased is lost fortuitously

The lease is terminated. If the thing is reconstructed,

there is no automatic renewal of the lease contract, if
there is no BF involved.

When thing lost is partially lost/extinguished

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1. Rescission
2. Reduce rent to ½

Tacita Reconduccion (Tacit renewal of a contract

of lease) – Implied New Lease

A new contract of lease is impliedly created or

established if at the end of the lease contract, the
lessee continues enjoying the lease for 15 days, with
acquiescence of the lessor and no notice to contrary
provided by lessor.

Elements of Implied new lease

1. Lease contract has expired.

2. Lessee continues enjoying the property for period of
15 days or more after expiration.
3. Continued enjoyment is with acquiescence of the
lessor.
4. No notice to contrary provided by the lessor.

Period of the new lease according to the

provisions of the law (Also when period of lease
is not fixed)

Rural land – duration is what is necessary to gather

fruits it may yield for a year.

Urban land – duration is depending on rent paid

(yearly if monthly rent, monthly if weekly rent, etc.)

Grounds to eject a lessee judicially

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1. Period has expired.
2. Lack of payment of price
3. Violation of conditions of contract
4. Lessee devotes the thing leased to use other than
what was stipulated or its nature.

Different instances where the purchaser of the

thing leased cannot terminate the lease

1. When the lease is recorded in the ROP

2. There is a stipulation in the contract of sale that the
purchaser will respect the lease.
3. The purchaser actually knows of the existence of
the lessee.
4. The sale is fictitious.
5. The sale is pacto de retro.

Rule as to improvements introduced by the

lessee on the property, upon termination of the
lease

1. For useful improvements

PREMISE: These are suitable to the purpose of the
lease and did not alter the form/substance of the
property. The lessor must pay the lessee ½ val;ue of
improvement. If lessor refuses, the lessee can remove
the thing, even if it causes damage.

2. For ornamental improvements

Lessee not entitled to reimbursement. But the lessee
may remove it if it does not cause any damage.
But the lessor may choose to pay the value of the

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thing, which terminates the lessee’s right to remove
the improvement.

* Lessees are not builders or possessors in GF under

property law because they know their right and
occupancy of the land is based on a contract of lease.

Contract for piece of work

One where the contractor binds himself to execute a

piece of work for the employer, in consideration of a
certain price or compensation. The contractor may
either employ only his skill/labor or furnish the
material himself.

Loss if the contractor bound himself to purchase

the material – If the loss occurs before the delivery,
the contractor bears the loss XPN: if there is delay in
receiving it (mora accipiendi)

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