CHAPTER 2: FORMALITIES OF AGENCY
appearing in a public document.
HOW AGENCY MAY BE CONSTITUTED
ARTICLE 1869. Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the
agency, knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
ARTICLE 1870. Acceptance by the agent may also be express, or implied from
his acts which carry out the agency, or from his silence or inaction according
to the circumstances. (n)
 CONTRACT OF AGENCY IS A CONSENSUAL CONTRACT
 The contract of agency is perfected by mere consent
 There is consent once there is a meeting of the minds on:
1. The object
 The object is the agent’s service, which is to enter into
juridical acts on behalf of the principal
2. The consideration
 Primarily onerous/valuable consideration
 May be based on pure liberality on the part of the agent
 LIM v CA: CONTRACT OF AGENCY IS VALID & ENFORCEABLE IN
WHATEVER FORM IT MAY HAVE BEEN ENTERED INTO
 SC noted that there are some provisions of law which require certain
formalities for particular contracts:
1. Form is required for the validity of the contract
 E.g. Donation
2. Form is required to make the contract effective as against third
parties
ARTICLE 1357. If the law requires a document or other special form,
as in the acts and contracts enumerated in the following article, the
contracting parties may compel each other to observe that form, once
the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract. (1279a)
ARTICLE 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest therein
are governed by articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or
of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which has
for its object an act appearing or which should appear in a public
document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act
All other contracts where the amount involved exceeds five hundred
pesos must appear in writing, even a private one. But sales of
goods, chattels or things in action are governed by articles, 1403,
No. 2 and 1405. (1280a)
3. Form is required for the purpose of proving the existence of the
contract
 E.g. Those provided in the Statute of Frauds in 1403
 SC held that since a contract of agency to sell pieces of jewelry on
commission DOES NOT fall under any of the three categories, said
contract was considered valid and enforceable in whatever form it
may have been entered into
 SC also held that when the agent signs her signature on the face of
the receipt, showing that she receives the jewelry for her to sell on
commission, she is bound to the obligations of an agent. The
position of the agent’s signature was ruled immaterial.
 This ruling was contrasted with the ruling in Borador v Luz,
where it was held that the absence of the signature of the
purported principal on the receipts covering the delivery of
jewelries to the purported agent is a clear indication that said
principal never appointed the recipient as its agent
1. PERFECTION FROM THE SIDE OF THE PRINCIPAL
 IDEAL FORM OF ENTERING INTO A CONTRACT OF AGENCY
 Principal enters into a contract of agency when he issues a written
power of attorney to the person designated as agent
 OTHER WAYS OF ENTERING INTO A CONTRACT OF AGENCY
 Since there is no requirement that for agency to arise it must be in
writing, an agency is also constituted by the principal’s:
 Implied acts
 Silence
 Lack of action
 Failure to repudiate the agency
o Knowing that someone is acting in his name
 Examples in Cited Jurisprudence:
 Equitable PCI-Bank v Ku: Where the law firm allowed the
employee of its client to occasionally receive its mail, and not
having formally objected to the receipt by said employee of a
court process, it was construed to mean that an agency
relationship had been established
 Conde v CA: The execution of the memorandum of
repurchase by the buyers’ son-in-law, which stood
unrepudiated for many years, constituted an implied agency
2. PERFECTION FROM THE SIDE OF THE AGENT
 ACCEPTING A CONTRACT OF AGENCY
 An agency is constituted by the agent’s:
  Express Acts
 Implied acts carrying out the agency
 Silence
 Inaction
 Villanueva’s Critique of Art. 1870, referring to the implied acceptance
of the agent
1. Art.1870 is surplusage at best
On the agent’s “implied acts carrying out the agency”
 Every act of the agent in pursuance of the agency is never
implied because the requirement is that he must enter into a
contract “in the name of the principal”
On the agent’s “silence or inaction according to the circumstances”
 If an agent says nothing at the time he is appointed, and
subsequently pursues the agency in the name of the principal,
the juridical act entered into the principal’s name is an express
acceptance
2. By providing presumptive rules, Art. 1870 can serve commercial
ends
 From the moment one accepts an agency expressly or
impliedly, he can be made liable for breach of duty
3. The better rule would be that a principal should never presume that
a designated person has accepted the agency by mere silence,
 The principal should be vigilant in protecting his rights
3. INSTANCES WHEN THERE IS DEEMED TO BE MEETING OF MINDS
BETWEEN PRINCIPAL AND AGENT
ARTICLE 1871. Between persons who are present, the acceptance of
the agency may also be implied if the principal delivers his power of
attorney to the agent and the latter receives it without any objection. (n)
ARTICLE 1872. Between persons who are absent, the acceptance of the
agency cannot be implied from the silence of the agent, except:
(1) When the principal transmits his power of attorney to the agent,
who receives it without any objection;
(2) When the principal entrusts to him by letter or telegram a power of
attorney with respect to the business in which he is habitually engaged
as an agent, and he did not reply to the letter or telegram. (n)
 EVIDENCING THE PERFECTION OF THE CONTRACT OF AGENCY
 Ideal Form: When the constitution of the agency is made with both
principal and agent being physically present at the time of perfection
of the contract of agency
 The acceptance of the agency may be implied if the principal
delivers his power of attorney to the agent and the latter
receives it without objection
 An agency can also be constituted when the would-be principal and
the would-be agent are not physically present in one place
 General Rule: There can be no implied acceptance of the
agency from the silence or inaction of the agent
 Exceptions:
(1) When the principal “transmits his power of attorney to
the agent” (i.e. it is in writing or some other form), who
receives it without any objection
(2) When the principal entrusts to the agent “by letter or
telegram, a power of attorney”, with respect to the
business in which he is habitually engaged as an agent,
and he did not reply to the letter or telegram
 Villanueva’s Critique of Art. 1870 vis a vis Art. 1872
Art. 1870 Art. 1872
Acceptance by the agent may No implied acceptance from the
also be implied from his silence silence of the agent EXCEPT for
or inaction according to the the two instances enumerated
circumstances
 The general rule under Art. 1872 is actually contrary to the
implied acceptance rule in Art. 1870
 Under Art. 1872, other than the two circumstances laid out
therein, courts should not draw any conclusion of implied
acceptance on the part of the purported agent by his silence
or inaction
o Thus, it would be better that Art. 1870 be deleted
entirely
o Art. 1872 provides for the better rule
 FORM OF POWER OF ATTORNEY
 The language used in Art. 1871 and Art. 1872 indicate that the
power of attorney must constitute a written instrument
 Both cases refer to situations where the principal delivers and
transmits his power of attorney to the agent
 Therefore, the provisions contemplate that the power of
attorney be in writing
 Today, a power of attorney embodied in an electronic document or
electronic mail would be considered an equivalent to a written
instrument under the Electronic Commerce Law
 Question asked in class: Does the power of attorney have to be
notarized? NO.
PERFECTION OF CONTRACT OF AGENCY AS IT
AFFECTS THIRD PERSONS
ARTICLE 1873. If a person specially informs another or states by public
advertisement that he has given a power of attorney to a third person, the latter
thereby becomes a duly authorized agent, in the former case with respect to the
person who received the special information, and in the latter case with regard
to any person.
The power shall continue to be in full force until the notice is rescinded in the
same manner in which it was given. (n)
ARTICLE 1921. If the agency has been entrusted for the purpose of contracting
with specified persons, its revocation shall not prejudice the latter if they were
not given notice thereof. (1734)
ARTICLE 1922. If the agent had general powers, revocation of the agency does
not prejudice third persons who acted in good faith and without knowledge of
the revocation. Notice of the revocation in a newspaper of general circulation is
a sufficient warning to third persons. (n)
 CONSTITUTION OF AGENCY EVEN WHEN THERE HAS BEEN NO MEETING
OF THE MINDS BETWEEN THE PRINCIPAL AND AGENT
 Art. 1873 implies that even when there is, strictly speaking, no contract of
agency, there is one deemed to have arisen:
1. With respect to the third party
 When the third party has been specially informed by the
principal has given a power of attorney to another (the
purported agent)
2. With regard to any person
 When the principal states by advertisement that he has given a
power to a particular individual (the purported agent)
 The power of the individual who becomes the duly authorized agent of the
principal shall continue to be in full force until the notice is rescinded in the
same manner in which it was given
 EVENTUAL ACCEPTANCE BY THE AGENT OF HIS DESIGNATION
 Both scenarios in Art. 1873 presume that ultimately the agent would have
accepted the designation of being the agent of the principal
 For the agency to come to pass, the agent must enter into contracts with
third parties in the name of the principal
 REVOCATION OF THE AGENCY WITH RESPECT TO THIRD PARTIES
 The rules on constitution of agency as regards third parties must be
consistent with the rules providing for their revocation
 The revocation of a special agency shall not prejudice the specific third
persons the agent has contracted with on behalf of the principal
 Special Agency: agency that has been entrusted for the purpose of
contracting with specific persons
 The revocation of a general agency will not prejudice third persons who
acted in good faith and without knowledge of the revocation
 However, notice of the revocation in a newspaper of general
circulation constitutes sufficient notice to bind third persons
 General Agency: agency that grants an agent general powers
 Illustration of the effect of revocation on third parties in jurisprudence:
 Rallos v Yangco: A long-standing client, acting good faith and
without knowledge, having sent goods to sell on commission to the
former agent of the defendant, could recover from the defendant
when no previous notice of the termination was given said client.
1. RULES ON EXISTENCE OF AGENCY, AS TO THIRD PARTIES
 AN AGENCY IS NEVER PRESUMED
 Persons dealing with an agent must ascertain:
1) The fact of agency
2) The nature and extent of the agent’s authority
 A third person must act with ordinary prudence and
reasonable diligence to ascertain whether the agent is acting
and dealing with him within the scope of his powers
 If he knows, or has good reason to believe that the
agent is exceeding his authority, he cannot claim
protection
 Under such circumstances he should refuse to deal
with the agent at all, or should ascertain from the
principal the true condition of affairs
 DOCTRINES FROM JURISPRUDENCE
 People v Yabut: The relationship of principal and agent cannot
be inferred from mere family relationship
 Compania Maritima v Limson: The declaration of one that he is
an agent of another is never to be accepted at face value,
except in those cases where an agency arises by express
provision of law
 Dizon v CA: A co-owner does not become an agent of the other
co-owners
 Woodschild Holdings v Roxas Electric Construction: Persons
dealing with an assumed agency are bound at their peril. If they
would hold the principal liable, the burden of proof to establish
the fact and extent of the agency is upon them.
 Recio v Heirs of Altamirano: When a third party relies upon the
words of the purported agent without securing a copy of the
SPA, such third party was bound by the risk accompanying
such trust on the mere assurance of the purported agent
 Country Bankers v Keppel Cebu Shipyard: Where the SPA
provided clearly the limit of the entitles whom the agent can
issue a surety bond, an insured who does not fall within such
authority cannot claim good faith
2. AGENCY BY ESTOPPEL
ARTICLE 1873. If a person specially informs another or states by public
advertisement that he has given a power of attorney to a third person,
the latter thereby becomes a duly authorized agent, in the former case
with respect to the person who received the special information, and in
the latter case with regard to any person.
The power shall continue to be in full force until the notice is rescinded
in the same manner in which it was given. (n)
ARTICLE 1911. Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the
latter to act as though he had full powers. (n)
 PRINCIPAL IS ESTOPPED BY HIS OWN ACTS
 If the principal specially informs another or states by public
advertisement that he has given a power of attorney to a third
person, the latter becomes his duly authorized agent
 He cannot claim otherwise later on
 If the principal allowed the agent to act as though he had full
powers, the principal is solidarily liable with the agent
 Even if the agent has exceeded his authority
 ELEMENTS OF AGENCY BY ESTOPPEL (Litonjua v Eternit Corp)
 a) The principal manifested a representation of the agent’s
authority OR he knowingly allowed the agent to assume such
authority
b) The third person, in good faith, relied upon such representation
c) Relying upon such representation, such person has changed
his position to his own detriment
 Question asked in class: Differentiate agency by estoppel and
implied agency
AGENCY BY ESTOPPEL IMPLIED AGENCY
Constituted based on a Derived from the acts of
representation made by the the principal, his silence
principal or his act of allowing the or inaction, or his failure
agent to assume authority to repudiate the agency
There is no agency at all, as there There is an existing
was no previous meeting of the agency (there was a
minds, but the purported agent has meeting of the minds)
apparent authority to represent the
principal due to the latter’s
manifestation or act of allowing the
agent to act as if he had such
authority
 ILLUSTRATIONS IN JURISPRUDENCE
 Macke v Camps: The owner of a hotel/café business allowed a
person to use the title “managing agent”, and allowed him to
perform the duties usually entrusted to a managing agent. The
Court held that the owner was bound by the acts of such
person.
 De la Pena v Hidalgo: When a person who took charge of the
administration of property without express authorization by the
owner, and performed the duties of his office without opposition
on the owner’s part for nearly 9 years, is deemed to have
administered the said property by virtue of an implied agency.
 Central Surety v C.N. Hodges: The insurance company
induced the public to believe that its branch manager had
authority to issue surety bonds by honoring several surety
bonds such manager issued in its behalf.
 Naguiat v CA: If by the interaction between a purported
principal and a purported agent in the presence of a third
person, the latter was given the impression of the existence of
a principal-agent relation, and the purported principal did
nothing to correct such impression, he cannot be permitted to
deny the authority of the purported agent.
 VILLANUEVA’S COMMENT ON AGENCY BY ESTOPPEL
 When the agent pursues juridical acts with third parties in the
name of the principal, with knowledge of the principal, this
would constitute a meeting of the minds (not a mere estoppel)
FORMAL REQUIREMENTS ON GRANT OF POWERS TO
AGENT
 BASIC PREMISE ON THE RESULTING CONTRACTS IN RELATION TO THE
AGENT’S AUTHORITY
 When an agent has been duly appointed, such agent must act within the
scope of his authority in order to make the resulting juridical acts entered
into the name of the principal VALID and BINDING on the latter
 This basic premise is the basis for the rules that govern the extent of power
granted to the agent once the agency relationship is established, which will
be discussed in the following sections
1. GENERAL PRINCIPLES ON CONTRACTS ENTERED INTO BY AGENTS
Art. 1317. No one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority
or legal representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked by the other
contracting party. (1259a)
Art. 1403. The following contracts are unenforceable, unless they are
ratified:
(1) Those entered into in the name of another person by one who has been
given no authority or legal representation, or who has acted beyond his
powers; xxx
 VALIDITY OF CONTRACT DEPENDS ON POINT-OF-VIEW
 From the principal’s point-of-view, a contract that has been entered
in his name by another without consent or outside the scope of
authority given him is VOID
 But from the point-of-view of the courts looking at a contract, which
was entered in the principal’s name by another without consent or
outside the scope of authority given him, said contract is NOT VOID
but merely unenforceable
 The contract is susceptible of ratification by the principal
2. GENERAL POWERS OF ATTORNEY
ARTICLE 1877. An agency couched in general terms comprises only acts
of administration, even if the principal should state that he withholds no
power or that the agent may execute such acts as he may consider
appropriate, or even though the agency should authorize a general and
unlimited management. (n)
 GENERAL POWER OF ATTORNEY IS DEEMED GRANTED THRU THE
CONTRACT OF AGENCY
 As long as the agency relationship exists, and in the absence of an
SPA, the agent is deemed to have been granted only a general
power of attorney
 Thus, his powers cover only acts of administration, not
dominion
 Every agency couched in general terms can only be construed as
granting to the agent the power to execute acts of administration,
even if the principal:
(1) States that he withholds no power from the agent
 (2) States that the agent may execute acts he considers
appropriate
(3) Authorizes general and unlimited management
 ACTS OF ADMINISTRATION
 To act in the ordinary course of business
 “in the ordinary course of business”: covers what can be
expected to confront the owner of the business on the day-
to-day running of the affairs of the business enterprise
 As to what constitutes an act in the ordinary course of business, this
is determined by the nature of the business that has been placed
under the administration of the agent
 If the act is a matter that, from the nature of the business, is
expected to occur, and which would not change the course
of the business  mere act of administration
 If the act is something that is not expected to happen in the
day-to-day affairs  act of ownership or strict dominion
 EXAMPLES IN JURISPRUDENCE
 Germann & Co. v Donaldson, Sim & Co.: When the agent is given a
written power of attorney to be the manager of the Manila branch of
the principal’s business, it cannot be supposed that it was the
intention of the principal to withhold from his agent the power to sue
for the collection of debts, as such power is essential to the efficient
management of the business. Such power is part of the mere
administration of such a business.
 NOTE: The ratio no longer holds, as Art. 1877 of the NCC
requires an SPA for the agent to sue on behalf of the
principal. The power to sue is now considered as a power
of strict dominion.
 Yu Chuck v Kong Li Po: An officer who has control and management
of the principal’s business, is deemed to have power to employ such
agents and employees as are usual and necessary in the conduct of
the corporation’s business, except only where such authority is
expressly vested in the Board of Directors.
3. MUST POWERS OF ATTORNEY BE IN WRITING?
 THE GRANT OF POWER OF STRICT DOMINION MUST IDEALLY BE IN
WRITING
 The authority of the agent is deemed to cover only acts of
administration, unless there be specific grant of power of acts of
ownership
 Therefore, the clearest manner to show that there is a specific grant
of power of strict ownership is that said grant be in writing
 Otherwise, the presumption that the agent can only pursue
acts of administration will prevail
 When an SPA is done orally, the agency relationship maybe valid as
between the principal and agent, but third parties who deal with the
agent must require written evidence of his power to execute acts of
ownership
 If the third party fails to do so, he binds himself to the
contract at his own risk
 ILLUSTRATIONS IN JURISPRUDENCE
 Borador v CA
(1) The Court held that it was inexcusably negligent of petitioners to
entrust to Deganos several pieces of jewelry without requiring a
written authorization from his principal
 GR: A third party is bound to exercise due diligence in
determining the extent of authority of the agent. If he fails to
do so, he cannot enforce the contract against the principal.
 EX: A third party can reasonably presume that the agent is
granted general powers since every agent is deemed
granted authority to bind the principal for acts of
administration.
(2) The Court also set forth the minimum requirement of due
diligence required of the third party: he must demand a
WRITTEN authority coming from the principal
 Home Assurance v US Lines Co.: An SPA not made in writing must
be duly established by evidence other than the self-serving assertion
of the party claiming that such authority was verbally given him
 The RoC requires an SPA for attorneys to compromise the
litigation of their clients
 Veloso v CA: A notarized power of attorney carries the evidentiary
weight conferred upon it with respect to its due execution, although a
power of attorney need not be in a public document to be valid and
binding
 Linan v Puno: The written power of attorney whereby the agent was
appointed so that “he may administer the interest I possess in the
municipality of Tarlac, purchase, sell, collect and pay, as well as sue
and be sued…”, was deemed to have authorized the agent to validly
sell a piece of land situated in Tarlac
 NOTE: Subsequent to Linan, the rules of construction of
contracts of agency have taken a stricter route. The current
rule in determining W/N the power granted is the power to
do acts of administration or acts of dominion, is based on
the nature of the power given under the operative
provisions of the instrument, not the designation of the
instrument, and not on the words used.
 Olaguer v Purugganan: The instrument will be held to grant only
those powers that are specified
 Woodchild Holdings v Roxas Electric: The courts will not infer or
presume broad powers from deeds which do not sufficiently include
property or subject, under which the agent is to deal
 Pineda v CA: The SPA that the beneficiaries of a group insurance
granted Capt. Naval excludes any intent to grant a general power of
attorney to collect from the insurance company the proceeds coming
from the group insurance taken out by the employer
4. SPECIAL POWERS OF ATTORNEY
a. What makes an agency a “special power of attorney?”
b. Specific instances where the law requires a special power of
attorney

1) To make payments as are not usually considered as
acts of administration
2) To effect novation which put an end to obligations
in existence when the agency was constituted
3) Special powers of attorney with respect to
principal’s causes of action
4) To waive any obligation gratuitously
5) To enter into any contract by which ownership of an
immovable is transmitted or acquired
i. Does the grant of special power to sell
include the power to mortgage, and vice
versa?
ii. Does the power to sell for “any amount”
include the power to effect an exchange or
barter?
5-A) Sale of a piece of land through an agent
i. Article 1874 covers dispositions of parcels
of land, done onerously or gratuitously
ii. Does Article 1874 cover agency to purchase
land or any interest therein?
iii. Is an oral contract of agency to sell a parcel
of land itself void?
iv. Is sale of a piece of land pursuant to an oral
special power to sell void or
unenforceable?
v. How detailed must the SPA to sell be?
5-B) Agent cannot validly purchase property of the
principal held for sale
Art. 1491. The following persons cannot acquire by
purchase, even at a public or judicial auction, either
in person or through the mediation of another:
xxx
(2) Agents, the property whose administration or
sale may have been entrusted to them, unless the
consent of the principal has been given;
 Unless expressly authorized, an agent cannot purchase
the property of his principal, and if he does so, the sale
would be void
 Even when the agent has been granted an SPA
to sell a land or any interest in it, such power
DOES NOT include, by implication, the power to
sell to himself
6) To make gifts
Art. 725. Donation is an act of liberality whereby a
person disposes gratuitously of a thing or right in
favor of another, who accepts it. (618a)
Art. 1878. Special powers of attorney are necessary
in the following cases:
xxx
(6) To make gifts, except customary ones for charity
or those made to employees in the business
managed by the agent;
 GR: For an agent to have the power to make gifts or
donations on behalf of the principal, it would require
such power to be in the form of a SPA
 EX:
1. Donations are customary ones for charity
2. Donations are those made to employees in the
business managed by the agent
 When a gift or donation is made by an agent on behalf
of the principal is not covered by a SPA, it DOES NOT
become void for failure to comply with the SPA
requirement, RATHER it is VOID if it fails to comply
with the formalities required under the Law on
Donation
 Every act of donation constitutes a solemn
contract (I,e, requires a certain form for its
validity)
 The net effect of compliance with the formalities
required by the Law on Donation would be to
make the resulting gift or donation
UNENFORCEABLE, when it does not comply
with the SPA requirement
7) To loan or borrow money
Art. 1878. Special powers of attorney are necessary
in the following cases:
xxx
(7) To loan or borrow money, unless the latter act be
urgent and indispensable for the preservation of the
things which are under administration;
  GR: The power of an agent to either loan or borrow
money is an act of strict ownership, thus, it requires a
SPA
 EX: When the loan is urgent and indispensable for the
preservation of the things which are under
administration
 PNB v Tang Ong Sze: The power of attorney, which
vested the agent with authority to execute any deed
for conveying any real or personal property DOES
NOT imply that the agent has the power to execute a
promissory note and a mortgage to secure its payment
 Hodges v Salas: The power granted to the agent was
only to borrow money and mortgage the principal’s
property to secure the loan, it cannot be interpreted to
include the authority to mortgage the properties to
support the agent’s personal loans
 De Villa v Fabricante: Art. 1878(7) was construed to
cover only the borrowing of money under mutuum,
and does not cover the purchasing of goods on credit
on behalf of the principal
 PNB v Sta. Maria: The special authority to borrow
money for the principal is not to be implied from the
SPA to mortgage real estate
 Rural Bank of Caloocan v CA: Where the authority of
the purported agent was only to follow up on the
principal’s loan application with the bank, it cannot be
presumed that he was also granted authority to borrow
on behalf of the principal
 Patrimonio v Gutierrez: Entrusting to an agent pre-
signed checks cannot be taken as legal authority to
enter a loan
i. Where money is borrowed in the name of
the principal without a SPA
 Contracts of loan entered into in the name of another
person by one who has been given no authority or
has acted beyond his powers, are
UNENFORCEABLE
ii. The agent himself being the lender
ARTICLE 1890. If the agent has been
empowered to borrow money, he may
himself be the lender at the current rate of
interest. If he has been authorized to lend
money at interest, he cannot borrow it
without the consent of the principal. (n)
 If the agent has been empowered to borrow money,
then he is not disqualified from being himself the
lender at the current rate of interest
8) To lease real property for more than one year
Art. 1878. Special powers of attorney are necessary
in the following cases:
xxx
(8) To lease any real property to another person for
more than one year;
Art. 1403. The following contracts are
unenforceable, unless they are ratified:
xxx
(2) Those that do not comply with the Statute of
Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some
note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be
received without the writing, or a secondary
evidence of its contents:
xxx
(e) An agreement of the leasing for a longer period
than one year, or for the sale of real property or of
an interest therein;
 The lease of real property for more than one year is
an act of strict ownership
 A lease of more than one year creates a right in
rem
 Art. 1878(8) does not cover leases of personal
property
 A lease of personal property for more than one
year may be considered as an act of
administration, depending on the nature of the
business given to the agent for administration
 An agreement for the leasing of real property for a
period longer than one year is unenforceable, unless
made in writing
 Even if the agent has an SPA to lease the real
property, when the lease itself for more than
one year is not in writing, the resulting contract
would still be unenforceable
 Vda. de Chua v IAC: The Court declared the
contract of lease void on the ground that the agent
was not armed with a SPA to enter into a lease
contract for a period of more than one year
9) To bind the principal to render some service without
compensation
Art. 1878. Special powers of attorney are necessary in
the following cases:
xxx
(9) To bind the principal to render some service without
compensation;
 Although the agent may bind himself to the contract
of agency without compensation, in order to bind the
 principal to enter into service without compensation
would be unenforceable without a SPA
 Any contract of service to be entered into on behalf
of the principal should be considered an act of strict
ownership
 Whether or not if it’s for compensation
 This is because a contract of services impinges
on obliging the principal to render a personal
obligation, wherein if he refuses, he becomes
liable for damages
10) To bind the principal in a contract of partnership
Art. 1878. Special powers of attorney are necessary in
the following cases:
xxx
(10) To bind the principal in a contract of partnership
Art. 1403. The following contracts are unenforceable,
unless they are ratified:
xxx
(2) Those that do not comply with the Statute of Frauds
as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a
secondary evidence of its contents:
xxx
(b) A special promise to answer for the debt, default, or
miscarriage of another;
 Every agreement by the agent on behalf of the
principal, which has the effect of obliging the
principal to contribute money or industry to a
common fund with the intention of deriving profits
therefrom would be unenforceable without a SPA
 Contracts of partnership or joint venture agreements
cannot be entered into in the name of the principal
without a covering SPA
11) To obligate the principal as a guarantor or surety
Art. 1878. Special powers of attorney are necessary in
the following cases:
xxx
(11) To obligate the principal as a guarantor or surety
Art. 2047. By guaranty a person, called the guarantor,
binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter should fail to do
so.
If a person binds himself solidarily with the principal
debtor, the provisions of Section 4, Chapter 3, Title I of
this Book shall be observed. In such case the contract is
called a suretyship. (1822a)
 No contract of guaranty or surety is enforceable
against the principal when it has been entered into by
an agent who possess no SPA to do so
 A contract of guaranty is unenforceable unless it is
made in writing
 Even when the agent has the requisite SPA,
the resulting contract would be unenforceable if
not reduced in writing
 BPI v Coster: A power of attorney to loan money does
not include the implied power to make the principal a
surety for the payment of the debt of a third person
 Director of Public Works v Sing Juco: Authorization to
execute contracts relating to the principal’s property
will not be interpreted as giving the attorney-in-fact
power to bind the principal by a contract of
independent guaranty or surety unconnected with the
conduct of the mercantile business.
 BA Finance Corp v CA: The authority of the agent to
approve a loan up to P350k without any security
requirement does not include the authority to issue
guarantees for any amount
12) To create or convey real rights over immovable
Art. 1878. Special powers of attorney are necessary in
the following cases:
xxx
(12) To create or convey real rights over immovable
Art. 1879. A special power to sell excludes the power to
mortgage; and a special power to mortgage does not
include the power to sell. (n)
 An agent cannot, in the name of the principal, create
or convey real rights over immovable property without
being possessed of a SPA
 Otherwise, the resulting contract would be
unenforceable against the principal
 This provision intends to cover dealings on immovable
property outside of:
 The sale of a piece of land or any interest
therein, which is specifically covered in Art.
1874
 Contracts of dispositions or acquisitions of
immovable by which ownership is conveyed
under Art. 1878(5)
 “Real rights” over immovable property would cover
contracts such as: mortgages, usufruct, easement
  The power to sell excludes the power to mortgage,
and the power to mortgage excludes the power to sell
 Rodriguez v Pamintuan and De Jesus: One
form of named special power cannot give the
presumption that it includes another SPA
 Valmonte v CA: The power to mortgage does
not carry the implied power to represent the
principal in litigation
 Philippine Sugar Estates Dev. Co. v Poziat: In
order to bind the principal to a real estate
mortgage executed by an agent, it must appear
upon its face, that its purpose is to be made,
signed and sealed in the name of the principal
o It is not enough that the agent is
authorized to make the mortgage
o He must also act in the name of the
principal
13) To accept or repudiate an inheritance
Art. 1878. Special powers of attorney are necessary in
the following cases:
xxx
(13) To accept or repudiate an inheritance
Art. 1044. Any person having the free disposal of his
property may accept or repudiate an inheritance.
 Accepting and repudiating an inheritance constitutes
acts of dominion
 Repudiation of an inheritance is an act that
goes against the interest of the principal, and
would require he grant of a SPA if it is to be
done through an agent
 Acceptance of the inheritance involves an act
of gratitude on the part of the heir, and
therefore, cannot be presumed to be a burden
that the principal is presumed to accept as a
matter of course
14) To ratify or recognize obligations contracted before
the agency
Art. 1878. Special powers of attorney are necessary in
the following cases:
xxx
(14) To ratify or recognize obligations contracted before
the agency
Art. 1392. Ratification extinguishes the action to annul a
voidable contract. (1309a)
Art. 1396. Ratification cleanses the contract from all its
defects from the moment it was constituted. (1313)
Art. 1405. Contracts infringing the Statute of Frauds,
referred to in No. 2 of Article 1403, are ratified by the
failure to object to the presentation of oral evidence to
prove the same, or by the acceptance of benefit under
them.
 “Ratify” involves the acceptance of a contract, which is
either voidable or unenforceable
 Has the effect of cleansing such contract of its
legal defects
 Such cleansing retroacts to the date of its
perfection
 Art. 1878(14) clearly recognizes that the act of
ratifying or cleansing a defective contract that
therefore could be validly enforced against the
principal is an act of strict ownership, and cannot be
effected by the agent without a SPA
 “Recognition” of an obligation refers to acknowledging
what was a natural obligation which was not therefore
the subject of civil enforcement
 It has the effect of making a former natural
obligation be transformed into a civil obligation
that can be enforced against the principal’s
estate
 Just like ratification, recognition is an act of ownership
which can only be performed by an agent who
possess a SPA
 BPI v Coster: A power of attorney to loan or borrow
money did not imply that the agent had a legal right to
sign the principal’s name to a promissory note, which
would make her liable for the payment of a pre-
existing debt, or to mortgage her property to secure
the pre-existing debt
15) Any other act of strict dominion
Art. 1878. Special powers of attorney are necessary in
the following cases:
xxx
(15) Any other act of strict dominion
Art. 1877. An agency couched in general terms
comprises only acts of administration, even if the
principal should state that he withholds no power or that
the agent may execute such acts as he may consider
appropriate, or even though the agency should
authorize a general and unlimited management. (n)
 Generally, the sale or purchase of personal properties
should be treated as acts of strict dominion, and would
 require a SPA to be executed by the agent in behalf of Art. 1926. A general power of attorney is revoked by a special
the principal one granted to another agent, as regards the special matter
 But under Art. 1877, a sale or purchase made in the involved in the latter. (n)
ordinary course of management is merely an act of  Art. 1926 does not really cover:
administration, and therefore, is included in an agency  “General power of attorney”, as that which
couched in general terms empowers an agent to execute only powers of
 The implication under Art. 1878(15) is that those that administration
may be constituted as acts of strict ownership, but not  “Special power of attorney”, as that which grants to
so specifically named in the first 14 paragraphs, may be the agent the power to enter into acts of ownership
shown to be mere acts of administration and may be in the name of the principal
governed by a general power of attorney  This is because the two types of powers of attorney cover
 Depending on the circumstances prevailing in different aspects of the principal’s affairs, and therefore,
each case can co-exist in two different agents
 May be implied from express powers or from the  Instead, what is covered by Art. 1926 is:
nature of the business covered by the agency  “General power of attorney”, as the universal
arrangement agency, which comprises all the business of the
 Garcia v De Manzano: The power to sell or encumber principal
movables may constitute either acts of administration or  “Special power of attorney”, as the particular agency,
acts of ownership. In this case, the grant of the express which covers one or more specific transactions
power to manage the entire business affairs of the
 The grant of specific power of attorney excludes from the
principal was deemed to include the power to sell co-
agent the power to execute all other acts of administration
ownership interest in movable property, especially when
 If the principal decides to detail he powers he
the sale was necessary to conduct the business of the
grants to the agent, then he means to exclude all
principal.
other powers of administration other than those
that are incidental to those specifically granted
c. Doctrine of implied powers flowing from express powers
 Pineda v CA: When an agent has been granted an
 The grant of express powers or special power of
express power of attorney, then the agent cannot execute
attorney must necessarily include all power implied or
any other act, whether it be an act of administration or
incidental to such express powers, even if they amount
ownership, outside the language of the express power of
to acts of ownership or strict dominion
attorney
 Examples:
 Government v Wagner: An agent granted the
authority to deal with property which the principal
might or could have done if personally present, is
deemed authorized to engage the services of a
lawyer to preserve the ownership and
possession of the properties of the principal
 Municipal Council of Iloilo v Evangelista: An
attorney-in-fact empowered to pay the debts of
the principal and to employ legal counsel to
defend principal’s interest, has the implied power
to pay the attorney’s fees on behalf of the
principal
 Robinson Fleming v Cruz: An agent empowered
to sell hemp includes the power to enter into the
usual and customary contract for its sale

d. SPA excludes general power of attorney over the matter
covered