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THE LAW AND PRACTICE ON

PHILIPPINE AGENCY LAWJune 24, 2009

NATURE, FORM AND KINDS OF AGENCY

I. DEFINITION AND OBJECTIVE OF AGENCY

1. Definii!n "n# O$%e&i'e !f A(en&)

Article 1868 of the Civil Code defines the contract of agency as one whereby

a !erson binds hi"self to render so"e service or to do so"ething in

re!resentation or on behalf of another, with the consent or authority of the

latter#$ %1&

'n Eurotech Industrial Technologies, Inc. v. Cuizon, (21 )C*A (84 +200-,

the )u!re"e Court held that .he underlying !rinci!le of the contract of

agency is to acco"!lish results by using the services of others / to do a

great variety of things lie selling, buying, "anufacturing, and trans!orting# 'ts

!ur!ose is to etend the !ersonality of the !rinci!al or the !arty for who"

another acts and fro" who" he or she derives the authority to act#$ +at !#

(92-

'n Orient Air Service & Hotel Representatives v. Court of Appeals, 19 )C*A

64( +1991-, the Court held that the !ur!ose of every contract of agency is the

ability, by legal fiction, to etend the !ersonality of the !rinci!al through the

facility of the agent but the sa"e can only be effected with the consent of the

!rinci!al#

'n iton!ua, "r. v. Eternit Corp., 490 )C*A 204 +2006-, the Court held that 't

bears stressing that in an agent3!rinci!al relationshi!, the !ersonality of the

!rinci!al is etended through the facility of the agent# 'n so doing, the agent,

by legal fiction, beco"es the !rinci!al, authoried to !erfor" all acts which

the latter would have hi" do# )uch a relationshi! can only be effected with

the consent of the !rinci!al, which "ust not, in any way, be co"!elled by law

or by any court#$%2& +at !# 225-

'n #oles v. Angeles, 492 )C*A 60 +2006-, the Court held /

.he CA is incorrect when it considered the fact that the su!!osed friends of

%!etitioners&, the actual borrowers, did not !resent the"selves to

%res!ondent&$ as evidence that negates the agency relationshi!it is

sufficient that !etitioner disclosed to res!ondent that the for"er was acting in

behalf of her !rinci!als, her friends who" she referred to res!ondent# 7or an

agency to arise, it is not necessary that the !rinci!al !ersonally encounter thethird !erson with who" the agent interacts# .he law in fact conte"!lates, and

to a great degree, i"!ersonal dealings where the !rinci!al need not

!ersonally now or "eet the third !erson with who" her agent transacts

!recisely, the !ur!ose of agency is to etend the !ersonality of the !rinci!al

through the facility of the agent# +at !# 622-

ately, in $hile% ining Corp. v. Co''issioner of Internal Revenue, ((1

)C*A 428 +2008-, the Court reiterated the !rinci!le that the essence of an

agency, even one that is cou!led with interest, is the agents ability to

re!resent his !rinci!al and bring about business relati0ns between the latter

and third !ersons#

:hen an agency relationshi! is established, and the agent acts for the

!rinci!al, he is insofar as the world is concerned essentially the !rinci!al

acting in the !articular contract or transaction on hand# Conse;uently, the

acts of the agent on behalf of the !rinci!al within the sco!e of the authority

have the sa"e legal effect and conse;uence as though the !rinci!al had

been the one so acting in the given situation# Rallos v. (eli% )o Chan & Sons

Realt* Corp., 81 )C*A 2(1 +198- Eurotech Industrial Technologies, Inc. v.

Cuizon, (21 )C*A (84 +200-#

)o"e of the legal conse;uences that flow fro" the doctrine of

re!resentation$ in the contract of agency are that

< =otice to the agent is notice to the !rinci!al#Air (rance v. Court of Appeals,

126 )C*A 448 +1985-#

< >nowledge of the agent !ertains to the !rinci!al

< :hen an agent !urchases the !ro!erty in bad faith, the !rinci!al is dee"ed

to be a !urchaser in bad faith# Cara', "r. v. aureta, 105 )C*A +1981-#

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< A suit against an agent in his !ersonal ca!acity cannot, without co"!elling

reasons, be considered a suit against the !rinci!al# $hilippine +ational an-

v. Ritratto )roups, Inc., 562 )C*A 216 +2001-#

*. P"+ie ! " C!n+"& !f A(en&)

.he !arties to a contract of agency are?

< the @*'=C'@A / the !erson re!resented

< the AB=. / the !erson who acts for and in re!resentation of another

.he other ter"s used for the !osition of agent are attorney3in3fact$, !roy$,

delegate$, or re!resentative$#

Although Article 1868 of the Civil Code defines agency in ter"s of being a

contract, it should also be considered that u!on the !erfection of the contract

of agency, it creates between the !rinci!al and an agent an on3going legal

relationshi! which i"!oses !ersonal obligations on both !arties# .his is in

consonance with the !rogressive nature$ of every contract of agency#

". C"-"&i) !f e P"+ie

.he !rinci!al "ust have ca!acity to contract +Arts# 152 and 1529-, and "ay

either be a natural or uridical !erson +Art# 1919%4&-#

.here is legal literature that holds that since the agent assu"es no !ersonal

liability, she does not have to !ossess full ca!acity to act insofar as third

!ersons are concerned#%5& )ince a contract of agency is first and fore"ost acontract in itself, the !arties +both !rinci!al and agent- "ust have legal

ca!acities to validly enter into an agency# Dowever, if one of the !arties has

no legal ca!acity to contract, then the contract of agency is not void, but

"erely voidable, which "eans that it is valid until annulled#

.hus, a voidable agency will !roduce legal conse;uences, when it is !ursued

to enter into uridical relations with third !arties# 'f the !rinci!al is the one who

has no legal ca!acity to contract, and his agent enters into a contractual

relationshi! in the !rinci!als na"e with a third !arty, the resulting contract is

voidable and subect to annul"ent# En the other hand, if the !rinci!al haslegal ca!acity, and it is the agent that has no legal ca!acity to contract, the

underlying agency relationshi! is voidable and when the inca!acitated agent

enters into a contract with a third !arty, the resulting contract would be valid,

not voidable, for the agents inca!acity is irrelevant, the contract having been

entered into, for and in behalf of the !rinci!al, who has full legal ca!acity#

.he foregoing discussions su!!ort the fact that as a general !ro!osition the

lac of legal ca!acity of the agent does not affect the constitution of the

agency relationshi!# And yet, it is clear under Article 1919+5- of the CivilCode that if during the ter" of the agency, the !rinci!al or agent is !laced

under civil interdiction, or beco"es insane or insolvent, the agency is i!so

ure etinguished# 't is therefore only logical to conclude that if the loss of

legal ca!acity of the agent etinguishes the agency, then necessarily any of

those cause that have the effect of re"oving legal ca!acity on either or both

the !rinci!al and agent at the ti"e of !erfection would not bring about a

contract of agency#

Ebviously, there see"s to be an incongruence when it co"es to !rinci!les

involving the legal ca!acities of the !arties to a contract of agency# .he

reason for that is that the !rinci!les actually occu!y two different legal levels#

:hen it co"es to creating and etinguishing the contractual relationshi! of

!rinci!al and agent, the !rovisions of law tae into consideration !urely

intra"ural "atters !ertaining to the !arties thereto under the !rinci!le of

relativity# )ince agency is essentially a !ersonal relationshi! based on the

!ur!ose of re!resentation, then when either the !rinci!al or agent dies or

beco"es legally inca!acitated, then the agency relation should i!so ure

cease# Fut a contract of agency is "erely a !re!aratory contract, where the

"ain !ur!ose is to effect through the agent contracts and other uridical

relationshi!s of the !rinci!al with third !arties# .he !ublic !olicy is that third

!arties who act in good faith with an agent have a right to e!ect that theircontracts would be valid and binding on the !rinci!al# .herefore, even when

by legal cause an agency relationshi! has ter"inated, say with the insanity of

the !rinci!al, if the agent and a third !arty enter into contract unaware of the

situation, then the various !rovisions on the aw on Agency would affir" the

validity of the contract# Gore on this !oint will be covered under the section

on the essential characteristics of agency#

/. E0een !f e C!n+"& !f A(en&)

ie any other contract, agency is constituted of the essential ele"ents of +a-

consent +b- obect or subect "atter and +c- cause or consideration#

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'n Rallos v. (eli% )o Chan & Sons Realt* Corp#, 81 )C*A 2(1 +198-, the

Court held that the following are the essential ele"ents of the contract of

agency?

+a- Consent, e!ress or i"!lied, of the !arties to establish the relationshi!

+b- Ebect, which is the eecution of a uridical act in relation to third !arties

+c- Agent acts as a re!resentative and not for hi"self and

+d- Agent acts within the sco!e of his authority#%4&

.he ele"ent not included in the *allos enu"eration is the cause or

consideration of every contract of agency# Hnder Article 18( of the Civil

Code, every agency is !resu"ed to be for co"!ensation, unless there is

!roof to the contrary# 'n other words, it is clear that there can be a valid

agency contract which is su!!orted by consideration of liberality on the !art

of the agent that although agency contracts are !ri"arily onerous, they "ay

also be constituted as gratuitous contracts# .he value that Article 18( of the

Civil Code brings into the aw on Agency is that the !resu"!tion is that

every agency contract entered into is for valuable considerationthat the

agency serves for the benefit of the !rinci!al e!ecting to be co"!ensated

for his efforts# 't is the !arty who avers that the agency was gratuitousthat

the agent agreed to serve gratuitously#

.he last two ele"ents included in the *allos enu"eration should not be

understood to be essential ele"ents for the !erfection and validity of the

contract of agency, for indeed they are "atters that do not go into !erfection,

but rather into the !erfor"ance stage of the agency relationshi!# .he non3eistence of the two !ur!orted essential ele"ents + i.e#, that the agent acted

for herself andIor the agent acted beyond the sco!e of her authority-, does

not affect the validity of the eisting agency relationshi!, but rather the

legality of the contracts entered into by the agent on behalf of the !rinci!al#

.hus, under Article 1885 of the Civil Code, 'f an agent acts in his own na"e,

the !rinci!al has no right of actions against the !erson with who" the agent

has contracted neither have such !ersons against the !rinci!al#$ Hnder

Article 1898 of the Civil Code, 'f the agent contracts in the na"e of the

!rinci!al, eceeding the sco!e of his authority, and the !rinci!al does not

ratify the contract, it shall be void$ as to the !rinci!al#

". C!nen

.he essential ele"ent of consent is "anifest fro" the !rinci!le that =o

!erson "ay be re!resented by another without his will and that no !erson

can be co"!elled against his will to re!resent another#$

.hus, the )u!re"e Court held in iton!ua, "r. v. Eternit Corp. , 490 )C*A 204

+2006-, held that consent of both the !rinci!al and the agent is necessary tocreate an agency? .he !rinci!al "ust intend that the agent shall act for hi"

the agent "ust intend to acce!t the authority and act on it, and the intention

of the !arties "ust find e!ression either in words or conduct between the"#

'n the sa"e "anner, #o'inion Insurance Corp. v. Court of Appeals, 56

)C*A 259 +2002-, held that since the basis for agency is re!resentation,

then there "ust be, on the !art of the !rinci!al, an actual intention to a!!oint

or an intention naturally inferable fro" his words or actions on the !art of the

agent, there "ust be an intention to acce!t the a!!oint"ent and act on it

and in the absence of such intent, there is generally no agency#

@erha!s the only ece!tion to this rule is agency by esto!!el,$ but even then

it is by the se!arate acts of the !ur!orted !rinci!al and !ur!orted agent, by

which they are brought into the relationshi! insofar as third !arties acting in

good faith are concerned# Gore discussions on the essential ele"ent of

consent shall tae !lace in the section on essential characteristic of

consensuality of contracts of agency#

$. O$%e& !+ S2$%e& M"e+

.he obect of every contract of agency is service, which !articularly is thelegal undertaing of the agent to enter into uridical acts with third !ersons on

behalf of the !rinci!al#

'te"s +b-, +c- and +d- in the enu"erated ele"ents of *allos can actually be

su""aried into the obect of every contract of agency to be that of service,

i#e#, the undertaing +obligation- of the agent to enter into a uridical act with

third !arties on behalf of the !rinci!al and within the sco!e of his authority#

&. C!ni#e+"i!n

.he cause or consideration in agency is the co"!ensation or co""ission

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that the !rinci!al agreed or co""itted to be !aid to the agent for the latters

services# Hnder Article 18( of the Civil Code, agency is !resu"ed to be for

co"!ensation, unless there is !roof to the contrary# 'n other words, liberality

"ay be the !ro!er cause or consideration for an agency contract only when it

is so e!ressly agreed u!on# Hnless otherwise sti!ulated, therefore, every

agent is entitled to re"uneration or co"!ensation for the services !erfor"ed

under the contract of agency#

.he old decision inAguna v. arena, ( @hil 650 +1952-, did not reflect the

general rule of agency3is3for3co"!ensation reflected subse;uently in Article

18( of the Civil Code# 'nAguna, although the agent had rendered service to

the !rinci!al covering collection of rentals fro" the various tenants of the

!rinci!al, and in s!ite of the agree"ent that !rinci!al would !ay for the

agents service, nevertheless, the !rinci!al allowed the agent to occu!y one

of his !arcels of land and to build his house thereon# .he Court held that the

service rendered by the agent was dee"ed to be gratuitous, a!art fro" the

occu!ation of so"e of the house of the deceased by the !laintiff and his

fa"ily, for if it were true that the agent and the deceased !rinci!al had an

understanding to the effect that the agent was to receive co"!ensation asidefro" the use and occu!ation of the houses of the deceased, it cannot be

e!lained how the agent could have rendered services as he did for eight

years without receiving and clai"ing any co"!ensation fro" the deceased#$

+at !# 652- 'fAgunawere decided under the =ew Civil Code, then under

Article 18(, which "andates that every contract of agency is dee"ed to be

for co"!ensation, then the result would have been ;uite the o!!osite#

#. Eni0een !f A(en ! C!ii!n An&!+e# !n e Ren#e+in( !f

Se+'i&e

.he co"!ensation that the !rinci!al agrees to !ay to the agent is !art of the

ter"s of the contract of agency u!on which their "inds "eet# .herefore, the

etent and "anner by which the agent would be entitled to receive

co"!ensation or co""ission is based on the ter"s of the contract#

)o"eti"es, the ter"s are not that clear, and decisions have had to deal with

the issue of when an agent has "erited the right to receive the co"!ensation

either sti!ulated or i"!lied fro" the ter"s of the contract# .he doctrine that

"ay be derived fro" the various decisions on the "atter are anchored on the

nature of the contract of agency as a s!ecies of contracts of services in

general# :hen the rendering of service alone, and not the results, is the

!ri"ordial basis for which the co"!ensation is given, then the !roof that

services have been rendered should entitle the agent to the co"!ensation

agreed u!on# En the other hand, if the nature of the service to be

co"!ensated is understood by the results to be achieved, e.g., that a

!articular contract with a third !arty is entered into in behalf of the !rinci!al,

then "ere rendering of service without achieve"ent of the results agreed

u!on to be achieved would not entitle the agent to the co"!ensation agreed

u!on#

.hus, in Inland Realt* v. Court of Appeals, 25 )C*A 0 +199-, the Court

held that

Although the ulti"ate buyer was introduced by the agent to the !rinci!al

during the ter" of the agency, nevertheless, the la!se of the !eriod of "ore

than one +1- year and five +(- "onths between the e!iration of !etitioners

authority to sell and the consu""ation of the sale, cannot authorie

co"!elling the !rinci!al to !ay the sti!ulated broers fee, since the agent

was not longer entitled thereto#

.he Court taes into strong consideration that utter lac of evidence of the

agent showing any further involve"ent in the negotiations between !rinci!al

and buyer during that !eriod and in the subse;uent !rocessing of the

docu"ents !ertinent to said sale# +at !# 9-

'n contrast, in anoto- ros. Inc. v. Court of Appeals, 221 )C*A 224 +1995-,

the Court held that although the sale of the obect of the agency to sell was

!erfected three days after the e!iration of the agency !eriod, the agent was

still be entitled to receive the co""ission sti!ulated based on the doctrine

held in $rats v. Court of Appeals, 81 )C*A 560 +198-, that when the agentwas the efficient !rocuring cause in bringing about the sale that the agent

was entitled to co"!ensation# 'n essence, the Court ruled that when there is

a close, !roi"ate and causal connection between the agents efforts and

labor and the !rinci!als sale of his !ro!erty, the agent is entitled to a

co""ission#

.he "atter !ertaining to entitle"ent to co""ission will be discussed in

greater details in the section that distinguishes a contract of agency fro" that

of a broers contract#

3. Eeni"0 C"+"&e+ii& !f A(en&)

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". N!in"e "n# P+in&i-"0

=ot only is the contract of agency s!ecifically na"ed as such under the Civil

Code, it is a !rinci!al contract because it can stand on its own without need

of another contract to validate it#

.he real value of the contract of agency being a no"inate and !rinci!al$

contract is that it has been so set a!art by law and !rovided with its own setof rules and legal conse;uences, that any other arrange"ent that essentially

falls within its ter"s shall be considered as an agency arrange"ent and shall

be governed by the aw on Agency, notwithstanding any intention of the

!arties to the contrary# After all, a contract is what the law says it is, and not

what the !arties call it#

'n #oles v. Angeles, 492 )C*A 60 +2006-, it was held that if an act done by

one !erson in behalf of another is in its essential nature one of agency, the

for"er is the agent of the latter notwithstanding he or she is not so calledit

will be an agency whether the !arties understood the eact nature of the

relation or not#

$. C!nen2"0

.he contract of agency is !erfected by "ere consent# Hnder Article 1869, an

agency "ay be e!ressed or i"!lied fro" the act of the !rinci!al, fro" his

silence or lac of action, or failure to re!udiate the agency agency "ay be

oral, unless the law re;uires a s!ecific for"#%(&

Hnder Article 180 of the Civil Code, acce!tance by the agent "ay also be

e!ress, or i"!lied fro" his acts which carry out the agency, of fro" hissilence or inaction according to the circu"stances#

&. Uni0"e+"0 "n# P+i"+i0) One+!2

Erdinarily, an agency is onerous in nature, where the agency e!ects

co"!ensation for his services in the for" of co""issions# Dowever, Article

18( recognies that an agency "ay be su!!orted by !ure liberality, and

thus would be gratuitous, but the burden of !roof would be to show that the

agency was constituted gratuitously#

:hen it is gratuitous, the contract of agency is unilateral contract because it

only creates an obligation on the !art of the agent# Fut even when it is

su!!orted by a valuable consideration +i.e.,co"!ensated or onerous

agency-, it would still be characteried as a unilateral contract, because it is

only the fulfill"ent of the !ri"ary obligations of the agent to render so"e

service u!on which the subordinate obligation of the !rinci!al to !ay the

co"!ensation agreed u!on arises#

:hen an agent acce!ts the agency !osition without co"!ensation, heassu"es the sa"e res!onsibility to carry out the agency and therefore incurs

the sa"e liability when he fails to fulfill his obligations to the !rinci!al# 't is

therefore rather strange that Article 1909 of the Civil Code !rovides that .he

agent is res!onsible not only for fraud, but also for negligence, which shall be

udged with "ore or less rigor by the courts, according to whether the agency

was or was not for a co"!ensation#$

#. P+e-"+"!+) "n# Re-+een"i'e

.here is no doubt that agency is a s!ecies of the broad grou!ing of what we

call the service contracts$, which includes e"!loy"ent contract,

"anage"ent contract and contract3for3a !iece of wor# .here are also

s!ecial service contracts which include the rendering of !rofessional service

+e.g.,doctors and lawyers-, and consultancy wor# Fut it is the characteristic

of re!resentation$ that is the "ost distinguishing "ar of agency when

co"!ared with other service contracts, in that the "ain !ur!ose is to allow

the agent to enter into contracts with third !arties on behalf of, and which

would bind on, the !rinci!al#

A contract of agency does not eist for its own !ur!ose it is a !re!aratory

contract entered into for other !ur!oses that deal with the !ublic# .hischaracteristic of an agency is reflected in various !rovisions in the aw on

Agency and in case3law, that see to !rotect the validity and enforceability of

contracts entered into !ursuant to the agency arrange"ent, even when to do

so would contravene strict agency !rinci!les# 'n another way of !utting it, an

agency contract is "erely a tool allowed to be resorted to achieve a greater

obective to enter into uridical relations on behalf of the !rinci!al

considerations that !ertain "erely to the tool certainly cannot outweigh

considerations that !ertain to the "ain obects of the agency#

'nA'on Trading Corp. v. Court of Appeals, 4 )C*A ((2 +200(-, the Court

decreed that 'n a bevy of cases as the avuncular case of ictorias illing

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Co., Inc. v. Court Appeals, %555 )C*A 665 +2000-&, the Court decreed fro"

Article 1868 that the basis of agency is re!resentation,$ +at !# (60-, and that

conse;uently one of the strongest feature of a true contract of agency is that

of control$ that the agent is under the control and instruction of the

!rinci!al# .hus, inictorias illing Co., Inc. v. Court of Appeals , 555 )C*A

665 +2000-, it was ruled

't is clear fro" Article 1868 that the basis of agency is re!resentation#%6& Enthe !art of the !rinci!al, there "ust be an actual intention to a!!oint or an

intention naturally inferable fro" his words or actions and on the !art of the

agent, there "ust be an intention to acce!t the a!!oint"ent and act on it,

and in the absence of such intent, there is generally no agency# Ene factor

which "ost clearly distinguishes agency fro" other legal conce!ts is control

one !erson the agent agrees to act under the control or direction of

another the !rinci!al# 'ndeed, the very word agency$ has co"e to connote

control by the !rinci!al#%& .he control factor, "ore than any other, has

caused the courts to !ut contracts between !rinci!al and agent in a se!arate

category# # # #

'n the instant case, it a!!ears !lain to us that !rivate res!ondent C)C was a

buyer of the )7* for", and not an agent of ).G# @rivate res!ondent C)C

was not subect to ).Gs control# .he ;uestion of whether a contract is one

of sale or agency de!ends on the intention of the !arties as gathered fro"

the whole sco!e and effect of the language e"!loyed# .hat the authoriation

given to C)C contained the !hrase for and in our +).Gs- behalf$ did not

establish an agency# Hlti"ately, what is decisive is the intention of the

!arties# .hat no agency was "eant to be established by the C)C and ).G isclearly shown by C)Cs co""unication to !etitioner that )* =o# 1214G

had been sold and endorsed$ to it# .he use of the words sold and

endorsed$ "eans that ).G and C)C intended a contract of sale, and not an

agency# +at !!# 6636-

'n #oles v. Angeles, 492 )C*A 60 +2006-, it was held that for an agency to

arise, it is not necessary that the !rinci!al !ersonally encounter the third

!erson with who" the agent interacts / !recisely, the !ur!ose of agency is to

etend the !ersonality of the !rinci!al through the facility of the agent#

'n Eurotech Industrial Technologies, Inc. v. Cuizon, (21 )C*A (84 +200-,

the Court held

't is said that the basis of agency is re!resentation, that is, the agent acts for

and on behalf of the !rinci!al on "atters within the sco!e of his authority and

said acts have the sa"e legal effect as if they were !ersonally eecuted by

the !rinci!al# Fy this legal fiction, the actual or real absence of the !rinci!al is

converted into his legal or uridical !resence / ;ui facit !er aliu" facit !er se#

+at !# (95-

Barlier, in Rallos v. (eli% )o Chan & Sons Realt* Corp #, 81 )C*A 2(1

+198-, the Court held that Agency is basically !ersonal, re!resentative, and

derivative in nature# .he authority of the agent to act e"anates fro" the

!owers granted to hi" by his !rinci!al his act is the act of the !rinci!al if

done within the sco!e of the authority# Kui facit !er aliu" facit !er se# LDe

who acts through another acts hi"self#$ +at !# 2(9-

415 P+in&i-0e F0!6in( f+! A(en&) C"+"&e+ii& !f 7P+e-"+"!+) "n#

Re-+een"i'e8

.he following !rinci!les flow fro" the a!!lication of the essential

characteristics of an agency being !re!aratory and re!resentative$ contract,

thus?

+a- .he contract entered into with third !ersons !ertains to the !rinci!al and

not to the agent the agent is a stranger to said contract although he

!hysically was the one who entered into it in a re!resentative ca!acity

< the agent has neither rights or obligations fro" the resulting contract

< the agent has no legal standing to sue u!on said contract

+b- .he liabilities incurred shall !ertain to the !rinci!al and not the agent

+c- enerally, all acts that the !rinci!al can do in !erson, he "ay do through

an agent, ece!t those which under !ublic !olicy are strictly !ersonal to the

!erson of the !rinci!al#

+d- .he agent who acts as such is not !ersonality liable to the !arty with

who" he contracts, unless he e!ressly binds hi"self or eceeds the li"itsof his authority without giving such !arty sufficient notice of his !owers# +Art#

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189-

+e- =otice to the agent should always be construed as notice binding on the

!rinci!al, even when in fact the !rinci!al never beca"e aware thereof# Air

7rance v# Court of A!!eals, 126 )C*A 448 +1985-

+f- >nowledge of the agent is e;uivalent to nowledge of the !rinci!al#

E9CEPT WHERE?

+1- Agents interests are adverse to those of the !rinci!al

+2- Agents duty is not to disclose the infor"ation, as where he is infor"ed by

way of confidential infor"ation and

+5- .he !erson clai"ing the benefit of the rule colludes with the agent to

defraud the !rinci!al +e eon M e eon, at !# 56,citing .BB*, at !#1(0-

.hus, in Eurotech Industrial Technologies, Inc. v. Cuizon , (21 )C*A (84

+200-, the Court held

Article 189 reinforces the fa"iliar doctrine that an agent, who acts as such,

is not !ersonally liable to the !arty with who" he contracts# .he sa"e

!rovision, however, !resents two instances when an agent beco"es

!ersonally liable to a third !erson# .he first is when he e!ressly binds

hi"self to the obligation and the second is when he eceeds his authority# 'n

the last instance, the agent can be held liable if he does not give the third

!arty sufficient notice of his !owers# +at !# (95-

'n $hilpotts v. $hil. fg. Co.,40 @hil 41 +1919-, the Court held that the right

of ins!ection given to a stocholder under the law can be eercised either by

hi"self or by any !ro!er re!resentative or attorney in fact, and either with or

without the attendance of the stocholder# .his is in confor"ity with the

general rule that what a "an "ay do in !erson he "ay do through another#

e. De+i'"i'e, Fi#2&i"+) "n# Re'!&"$0e

A contract of agency creates a legal relationshi! of re!resentation by the

agent on behalf of the !rinci!al, where the !owers of the agent areessentially derived fro" the !rinci!al, and conse;uently, it is fiduciary in

nature# Ene of the legal conse;uences of the fiduciary nature of the contract

of agency is that it is essentially revocable? neither the !rinci!al nor the agent

can be legally "ade to re"ain in the relationshi! when they choose to have it

ter"inated#

Severino v. Severino, 44 @hil# 545 +1925-, held that the relations of an agent

to his !rinci!al are fiduciary in character because they are based on trust and

confidence, which "ust flow fro" the essential nature a contract of agencythat "aes the agent the re!resentative of the !rinci!al# Conse;uently?

+a- As regards !ro!erty for"ing the subect "atter of the agency, the agent is

esto!!ed fro" asserting or ac;uiring a title adverse to that of the !rinci!al#

+Art# 145(-

+b- 'n a conflict3of3interest situation, the agent cannot choose a course that

favors herself to the detri"ent of the !rinci!al she "ust choose to the best

advantage of the !rinci!al# Tho'as v. $ineda, 89 @hil# 512 +19(1- $al'a v.

Cristo/al, @hil# 12 +1946- and

+c- .he agent cannot !urchase for herself the !ro!erty of the !rinci!al which

has been given to her "anage"ent for sale or dis!osition +Art# 1491%2&-

Un0e?

+i- .here is and e!ress consent on the !art of the !rinci!al + Cui v. Cui, 100

@hil# 915 +19(- or

+ii- 'f the agent !urchases after the agency is ter"inated + alera v. elasco,

(1 @hil# 69( +1928-#

'n Repu/lic v. Evangelista, 466 )C*A (44 +200(-, the Court held that

generally, the agency "ay be revoed by the !rinci!al at will, since it is a

!ersonal contract of re!resentation based on trust and confidence re!osed

by the !rinci!al on his agent# As the !ower of the agent to act de!ends on

the will and license of the !rinci!al he re!resents, the !ower of the agent

ceases when the will or !er"ission is withdrawn by the !rinci!al#

'n Orient Air Services v. Court of Appeals, 19 )C*A 64( +1991-, it was held

that the decision of the lower court ordering the !rinci!al airline co"!any to

reinstate defendant as its general sales agent for !assenger trans!ortation

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in the @hili!!ines in accordance with said )A Agree"ent,$ was unlawful

since courts have no authority to co"!el the !rinci!al to reinstate a contract

of agency it has ter"inated with the agent?

)uch would be violative of the !rinci!les and essence of agency, defined by

law as a contract whereby a !erson binds hi"self to render so"e service or

to do so"ething in re!resentation or on behalf of another, :'.D .DB

CE=)B=. E* AH.DE*'.N E7 .DB A..B*#$ 'n an agent3!rinci!alrelationshi!, the !ersonality of the !rinci!al is etended through the facility of

the agent# 'n so doing, the agent, by legal fiction, beco"es the !rinci!al,

authoried to !erfor" all acts which the latter would have hi" do# )uch a

relationshi! can only be effected with the consent of the !rinci!al, which "ust

not, in any way, be co"!elled by law or by any court# .he Agree"ent itself

between the !arties states that either !arty "ay ter"inate the Agree"ent

without cause by giving the other 50 days notice by letter, telegra" or cable#

%8& +at !# 6(6-

:. Diin(2ie# f+! Sii0"+ C!n+"&

". F+! e E-0!)en C!n+"&

Hnlie agency relationshi! which is essentially contractual in nature, an

e"!loy"ent contract under Article 100 of the Civil Code is .he relationshi!

between ca!ital and labor %which& are not "erely contractual# .hey are so

i"!ressed with !ublic interest that labor contracts "ust yield to the co""on

good# .herefore, such contracts are subect to the s!ecial laws on labor

unions, collective bargaining, stries and locouts, closed sho!, wages,

woring conditions, hours of labor and si"ilar subects#$ Gore s!ecifically, the

!ur!ose of an e"!loyer3e"!loyee relationshi! is for the e"!loyee to renderservice for the direct benefit of the e"!loyer or of the business of the

e"!loyer while agency relationshi! is entered into to enter into uridical

relationshi! on behalf of the !rinci!al with third !arties# .here is, therefore, no

re!resentation in a contract of e"!loy"ent#

'n #ela Cruz v. +orthern Theatrical Enterprises, 9( @hil 59 +19(4-, the Court

held that the relationshi! between the cor!oration which owns and o!erates

a theatre, and the individual it hires as a security guard to "aintain the !eace

and order at the entrance of the theatre is not that of !rinci!al and agent,

because the !rinci!le of re!resentation was in no way involved# .he security

guard was not e"!loyed to re!resent the defendant cor!oration in its

dealings with third !arties he was a "ere e"!loyee hired to !erfor" a

certain s!ecific duty or tas, that of acting as s!ecial guard and staying at the

"ain entrance of the "ovie house to sto! gate crashers and to "aintain

!eace and order within the !re"ises#

$. F+! e C!n+"& f!+ " Pie&e;!f;W!+