I. The Concept of Agency a.

Legal Relationship
 Connection between the principal and the agent
A. Purpose and Definition  Mechem: Agency as a legal relationship founded on
1. Purpose contract of created by law
 Allow a person to act on behalf of another  Restatement: (Common-law or True) Agency as a
 Etymology of the word agent or agency – Latin verb fiduciary relationship that arises when:
ago, agere and nouns agens, agentis o Principal manifests assent to the agent that
o Word denotes one who acts, a doer, a force the agent shall act on the principal’s behalf
of power that accomplishes things and subject to the principal’s control and
 Principal – party for whom another acts or the person o Agent manifests assent or otherwise
who is being represented consents to so act
 Agent – person who acts in behalf of a principal  American Jurisprudence: Agency as a fiduciary
relationship by which:
a. Accomplishment of More Tasks o Party confides to another the management of
 Principal can accomplish more tasks because more some business to be transacted in the
people are involved in the work former’s name or on his or her account and
 Basic theory of agency: Enable a person through the o By which such other assumes to do the
services of another to broaden the scope of his business and render and account of it
activities and receive the product of another’s efforts  Rallos v Felix Go Chan: Relationship of agency as one
o Pay the other for what he does but retaining whereby the principal (mandante) authorizes the agent
for himself whatever net benefit results from (mandatario) to act for and in his behalf in transaction
the work performed with 3rd persons
 Eurotech v Cuison: The underlying principle of the o SC considered agency from the POV of the
contract of agency is to accomplish results by using the principal, which is in contrast to how the CC
services of others defines it (from the POV of the agent)
 Severino v Severino: Relations of an agent to his
b. Multiple and Simultaneous Areas of Activity principal are fiduciary
 Principal can be in many places as the number of o Agent is estopped from acquiring or asserting
agents he appoints therefore he can accomplish title adverse to that of the principal
several things at the same time. o Agent’s position – analogous to a trustee’s
 End result: possibility of completing more tasks in less  Agent as fiduciary – obliged to act primarily for benefit
time of his principal in matters related to his agency
 Compared to hiring more workers, the nature of the
agency relationship allows the agent to accomplish b. Contract
more than an ordinary worker.  A1868, CC: Defines agency as a contract
o Because agent can enter into contracts for o More precise than A1709 of the OCC (its
principal origin) – A1709, OCC admits of other
relations (e.g. independent contractor)
c. Improved Performance  Since it is a contract, the 3 essential elements are
 Agency allows the principal to be represented by required:
people who may be more adept at the skills required o Consent
by the principal’s business or people who have an  ESSENTIAL FOR AGENCY
established network or reputation  BUT a legal relationship of agency
 Principal may prefer to delegate specific projects or he can arise without a contract (or
may not have the expertise etc consent) – those that are created by
operation of law
d. Multiple Businesses o Subject matter – performance of acts by
 Principal can handle several businesses at the same agent in representation of the principal
time and divide his time among the businesses as the o Cause – presumed to be compensation
need arises  But aside from this, a person may
 Agency is primarily a commercial relationship also request appoint as agent to
o Though it can be used even for non- protect his interests
commercial purposes  Juridical basis of agency: Representation
o Therefore, mere rendering of service doesn’t
2. Definition create agency
 Several meanings acc to CC and jurisprudence
 A1868, CC: Agency as a type of contract B. Elements of Agency
 A1869, CC: Two different senses:  A1868, CC:
o Agency may be express or implied -> refers o Person must bind himself to render some
to the manner the relationship is established service or to do something in representation
o Agency may be oral -> refers to the manner or on behalf of another person and
by which authorization or acceptance is made o With the consent of the other person
 It can also be used to refer to the business itself being  Jurisprudence (Rallos):
handled by the agency (A1870, 1876) o Consent, express or implied, of the parties to
 Juridical concept: establish the relationship
o Legal relationship or o Object is the execution of a juridical act in
o Contract relation to a 3rd person
o Agent acts as a representative, not for himself
 o Agent acts within the scope of his authority 4. Agents Act within the Scope of Authority
 Also a consequence of the agency relationship; NOT a
1. Consent to Establish the Relationship condition for its existence
 Orient Air Service v CA: Agency relationship cannot be o Only goes into the validity of the act, not nec
in any way be compelled by law or by any court the existence of the agency relationship
 Bordador v Luz: Deganos allegedly acted as a principal  A1869, CC: Implied agency may exist even if agent
of Brigida Luz when he bought jewelry from the acts outside of his authority
petitioner. Delanos only remitted a portion of what he o Provided the principal remains silent, doesn’t
owed. SC ruled that Deganos wasn’t an agent of Luz act or fails to repudiate the agency
because there is no showing Luz consented to
Deganos’ acts or authorized him to act on her behalf. THEREFORE: In reality, there are ONLY 2 ELEMENTS, even if
 Mere closeness of relationship (implying fiduciary jurisprudence lists 4:
relationship) doesn’t mean that there’s an agency 1. Consent of the principal and agent to establish an
relationship agency relationship
 Apex Mining Co v Southeast Mindanao Gold Corp: 2. Purpose of the contract is representation
Even though respondent is a 100% subsidiary
corporation of MMC, there’s no evidence showing resp C. Effect of Agency: Integration and Extension
is an authorized agent of MMC.  Establishment of agency relationship results in:
 INTENTION of parties is IMPORTANT o Integration of the personality of the principal
o Principal must have actual intention to appoint into that of the agent and
o Inferable from the principal’s words and  Personality of the principal is
actions merged with that of the agent
o Agent must have intent to accept appointment o Extension of the personality of the principal
and act upon it through the agent
 Tuazon v Heirs of Ramos: Sps Tuazon failed to pay for  Personality of the principal is
the rice they bought from Ramos. They alleged that reproduced in the persons of his
they were merely agents for Sps Buenaventura, who agents
were later impleaded. SC ruled that Sps Tuazons were
the rice buyers themselves and not mere agents of Consequences of the integration of personalities and extension
Ramos. of the principal’s personality:
o Absent mutual intent, there is generally no
agency. 1. Authority to Act
 Victorias Milling v CA: There must be an actual  Eurotech v Cuison: Actual or real absence of the
intention to appoint or an intention naturally inferable principal is converted into his legal or juridical presence
from his words or actions on the part of the principal. (qui facit per alium facit per se)
On the part of the agent, there must be an intention to  Therefore, he who does a thing by an agent is
accept the appointment and act on it. In the absence of considered as doing it for himself
such intent, there is generally no agency. o Principal becomes liable for obligations
contracted by the agent, provided it is within
2. Object is the Execution of a Juridical Act in Relation to a the authority of the agent
Third Person  Doles v Angeles: Law contemplates impersonal
 Subject matter / basis of contract of agency: dealings
representation  But there are some acts that cannot be delegated, like
 Not necessary that the 3rd person is identified or that personal acts (e.g. right to vote, making of a will,
specific juridical relation be specified at the making of an oath, etc)
establishment of agency
 De La Cruz v Northern Theatrical: Petitioner security 2. Agent Not Real Party-In-Interest
guard of respondent is not an agent of resp because  Liability of the 3rd party is to the principal
pet wasn’t employed to represent resp in dealings with  Uy and Roxas v CA: Rendering of such service by
3rd parties. Pet was a mere employee hired to perform agent didn’t make them parties to the contract of sale
a certain specific duty. executed in behalf of the principal.
o Casis: But this doesn’t mean that an o But an agent, in his own behalf, may bring an
employee cannot be an agent!! As long as action founded on a contract made for his
employee has power to represent his principal, as an assignee of such contract
employer to enter into binding transactions,  Angeles v Philippine National Railways: 3rd party’s
he can be both. liability on a contract is to the principal and not to the
agent. The relationship of the 3rd party to the principal
3. Agent Acts as Representative and Not for Himself is the same as that in a contract in which there is no
 That the appointed agent represents the principal is agent.
NOT an element for the establishment of an agency o Normally, agent has neither rights nor
contract liabilities against 3rd party.
o It is a consequence of the contract o BUT if the agent was constituted as an
o An agency cont can be established without assignee, the agent may, in his own behalf,
agent acting as agent sue on a contract made for his principal.
 Subsequent act of agent acting for himself under  However, that the person is merely an agent will not
circumstances of conflict of interest = BREACH excuse him from possible criminal liability.
o Doesn’t invalidate the contract  Ong v CA: Ong executed trust receipts on behalf of
ARMAGRI. ARMAGRI failed to pay or deliver the
 goods. Ong was convicted on 2 counts of estafa. SC ○ This type of authority only grants the agent to
affirmed his conviction because according to the Trust perform only acts of administration.
Receipts Law, the criminal liability for its violation falls ■ Example: If the principal authorizes
on the human agent responsible. thee agent to “manage the
o ITC: Ong is the signatory to the trust receipts, business”, the agent is only
loan applications and letters of credit. He also authorized the conduct acts of
didn’t explain or show why he isn’t administration.
responsible for the failure to turn over the
proceeds of the sale or to account for the “SPECIAL AGENCY” versus “AGENCY COUCHED IN
goods covered. SPECIFIC TERMS”
o Rule: Law of agency governing civil cases ● Special agency pertains to the scope of business
has no application in criminal cases. covered. It comprises of only of some or specific
 PnB v Ritratto Group: A suit against an agent cannot, aspects of the principal’s business. A special agent
without compelling reasons, be considered a suit does not handle all of the business of the principal.
against the principal. The injunction suit in this case ○ One cannot be a general and special agent at
was only directed against the agent. the same time.
● Meanwhile, under Art. 1878, certain transactions
NOTICE TO AGENT IS NOTICE TO THE PRINCIPAL require a special power of attorney (hereinafter, SPA),
● This is also known as the doctrine of imputed if such transaction would be entered into by agents in
knowledge and is a consequence of the integration behalf of the principal.
and extension of personality of the principal by reason ○ To be authorized to perform any of these
of the contract of agency. transactions, an agent must be specifically
● GENERAL RULE: The principal is chargeable with and authorized.
bound by the knowledge of or notice to his agent, ● In determining whether the instrument grants a
received while the agent was acting as such. SPA, it is the specificity of the authority granted
○ Rationale: To protect third persons who which would be binding, not the
exercise good faith in dealing with the agent. nomenclature/name of the instrument in favor of
● EXCEPTIONS: the agent.
○ Notice to the agent is notice to the principal, ○ Thus, an instrument may be couched as a
but notice to principal is not notice to the “general power of attorney”, but its content
agent. The doctrine does not work the other specifies that the agent is authorized to act or
way around. (Sunace International v. NLRC) enter into transaction covered by Art. 1978,
○ The doctrine will not also apply if the conduct then it is truly a SPA. (Veloso v. CA)
of the conduct and dealings of the agent ○ What matters is the extent of the power/s
raises a clear presumption that he will not contemplated upon the agent. The
communicate to the principal the facts in requirement of a SPA refers to the
controversy. NATURE of the authorization and NOT TO
■ Example: If the agent executes ITS FORM. (Veloso v. CA)
fraudulent acts against the principal. ■ If the SPA is not written, it must be
It cannot be said that the principal duly established by evidence (Lim
knew of such acts by reason of the Pin v. Liao Tan).
agent’s knowledge of the same.
WHAT IF THE AGENT ENTERS INTO A TRANSACTION
BAD FAITH OF THE AGENT IS BAD FAITH OF THE COVERED BY ART. 1978, BUT WITHOUT ANY SPA? WHAT
PRINCIPAL HAPPENS TO THE TRANSACTION/CONTRACT?
● A consequence of the integration and extension of ● Generally, the contract will become unenforceable,
personality of the principal by reason of the contract of pursuant to Art. 1403, since the agent into a contract in
agency. behalf of a person, where the latter did not give any
authority or legal representation to said agent. (Dungo
“GENERAL AGENCY” versus “AGENCY COUCHED IN v. Lopena)
GENERAL TERMS” ● An officer/agent of the corporation has no power to
● General agency pertains to the scope of business compromise or settle a claim by or against the
covered. It comprises of ALL the business of the corporation without any express power to do so. Such
principal. authority must emanate from the Board of Directors
○ “ALL the business of the principal” can mean (Vicente v. Geraldez)
two things: ● But said contract could be ratified by the principal.
■ Principal owns a number of ● In Cosmic Lumber v. CA, the agent in that case entered
businesses, say 10, and a general into a compromise agreement with a third party, which
agent would manage all of them. If is a transaction under Art. 1878 requiring a SPA.
the agent only manages 9 of them, However, the compromise agreement involved a sale
he is not a general agent. of particular parcel of land.
■ The agent is a general agent if he ○ Since the agent in that case had no SPA, what
manages the entirety of a particular happens to the compromise agreement?
business of the principal, but not ● Casis discussed the confusion caused by two
necessarily all of the several applicable provisions:
businesses of the principal. ○ Art. 1874. When a sale of a piece of land or
● Agency couched in general terms refers to the type of any interest therein is through an agent, the
authority conferred on the agent. authority of the latter shall be in writing;
otherwise, the sale shall be void.
 ○ Art. 1878. Special powers of attorney are o The BPI case doctrine only means that whatever
necessary in the following cases: specific authority not included in the instrument is
■ (5) To enter into any contract by excluded.
which the ownership of an - From BPI v De Coster, it can be seen that an SPA has an
immovable is transmitted or effect of excluding all authorities not specified. Non
acquired either gratuitously or for a specified authorities cannot be assumed from those
valuable consideration specified.
○ So if the agent sold a piece of land without a o Reason: The disinclination of courts to enlarge an
SPA, is the contract unenforceable pursuant authority granted beyond the powers expressly
to Art. 1878 (5), or void under Art. 1874? given and those which incidentally flow or derive
■ It is void, as ruled by the SC. therefrom as being usual or reasonably necessary
○ Casis provides rules to reconcile both and proper for the performance of such express
provisions: powers. (PNB v Sta Maria)
■ If the contract involved a sale of
land, there must be a written and Other cases illustrating the rule that only specific authorities
specific authorization to sell such specified can be exercised –
land. Thus, apply Art. 1874.
■ If the contract involves a sale of an 1. Case: Insular Drug v. PNB
immovable other than land or the Facts: Agent was a salesman and acted as a collector for the
transmittal of ownership the principal, instructed to receive checks and deposit them to the
same, there must be a specific account of the latter. The agent, however, deposited them to his
authorization. personal account, from which his wife withdrew the money. The
■ If the contact involves a transmittal Bank contends that the agent had an implied authority to indorse
of ownership of land other than thru all checks made out in the name of his principal.
a sale (i.e. donation), then there Issue: W/N the agent had a right to indorse commercial paper
must be a specific authorization. Ruling: No, such right cannot be inferred.

STRICT AND LIMITED CONSTRUCTION OF THE TERMS OF Case: Hodges v Salas

THE POWER OF ATTORNEY Facts: Carlota and Paz Salas executed a power of authority in
● A power of attorney must be strictly construed and favor of their bro-in-law Felix Yulo to enable him to obtain a loan
pursued. It is deemed to have granted only those and secure it w/ a mortgage on real property the Salas’ own.
powers which are specified therein and the agent may Felix then obtained a loan from Hodges, binding the principals
neither go beyond nor deviate from the same. solidarily with him, executing deed of mortgage. He then
○ In Mercado v. Allied Bank, the agent invested the money as he wished without applying it to the
constituted a mortgage over a piece of land benefit of the principals.
not covered by the SPA. Issue: W/N he can invest the money without applying it to the
● The courts cannot and will not enlarge the authority benefit of the principals.
granted beyond the powers expressly given and those Ruling: No, the terms of the power of authority are limited. The
which incidentally flow or are derived therefrom for the agent was only authorized to borrow amount which he may
proper and necessary performance of the powers thus deem necessary. There is no indication that he was authorized
granted. to convert the money for his personal use. He thus exceeded his
authority.
iii. Effect of Specific Authorization
2. Case: Bravo-Guerrero v Bravo
Case: BPI v. De Coster Facts: Spouses Simona and Mauricio Bravo owned two parcels
Facts: Gabriela Poizat issued in favor of her husband, Jean of land. Simona executed a General Power of Authority (GPA)
Poizat, a power of authority. Such allows him to loan any sums appointing Mauricio as her atty-in-fact authorizing him to
of money and fungible things at the rate of interest and for the mortgage or otherwise hypothecate, aell, assign, and dispose of
time and under conditions which he may deem convenient, any and all of (his) property…” Mauricio then mortgage the
making all these transactions with or without mortgages. Jean properties to PNB and DBP. He then conveyed the properties to
signed in the name of Gabriela a promissory note and a real Ofelia and Elizabeth Bravo, on the condition that the vendees
estate mortgage in favor of the bank. BPI then filed an action on were to assume the said mortgages. The deed of sale was not
the basis of the PN and obtained a favorable judgment. Gabriela annotated on the title, neither was it presented to the banks.
contends that Jean had no authority to execute the PN and the Simona and Mauricio’s grandson, Edward, represented by his
debt of Jean was a preexisting debt of his firm to which she was wife Fatima, filed an action for judicial partition of the properties
not a party to. among the grandchildren of the spouses and annulment of the
Issue: W/N Gabriela can be made liable as a surety of the deed of sale.
preexisting debt of a third party Issue: W/N Mauricio had authority to sell the properties
Ruling: No, there is no provision in the power of authority Ruling: Yes, even if the document is titled a GPA, the
authorizing Jean to sign anything which would make Gabriela a requirement of a special power of attorney is met if there is a
surety to a preexisting debt. Where in an instrument, the powers clear mandate from the principal specifically authorizing the
and duties are specified and defined, all of such powers and performance of the act. Article 1878 refers to the nature of the
duties are limited and confined to those, all other powers and authorization, not its form. In this case, Mauricio was
duties are excluded. authorized to “sell, assign and dispose of any and all of my
property” as well as to “act as my general rep and agent with full
- Casis says: such ruling shall not be misunderstood in cases authority to buy and sell..”
where an instrument contains both general and specific
authorities or powers of authority. 3. Case: Veloso v CA
Rulin: An agent was authorized to sell real property because the From said case, a simple request for assistance made by one
“GPA” included a specific authorization to sell real property. which was accepted by the other is enough to constitue an
There is no need to execute a separate SPA as the GPA already agency relationship
expressly authorized the agenet to sell the subject property. (Sir Casis pointed out though that in this case, the facts merely
stated that Jose Gana sought the assistance of Teresita and that
From the last two cases, it can seen that an instrument called a it can be arguedthat seeking her assistance is not sufficient to
general power of attorney may be suffiecient to authorize an create an agency relationship as it does not show actual
agent to do acts requiring specific authorization. intention to do so.)

2. Written
3. CLARIFYING THE TERMS
Art. 1874. When a sale of a piece of land or any interest
- An instrument or power of attorney cannot create a therein is through an agent, the authority of the latter shall
general and special agency at the same time (note, be in writing; otherwise, the sale shall be void. (n)
these refer to the scope)
- It is possible for a single instrument or power of attorney
to embody both general and special powers of - Exception to the general rule laid down in Article 1869
authority (note, these refer to the type of authority) stating that contracts of agency may be established orally

- SIR CASIS: To avoid confusion, it is best to use “general” a. Application

and “special” agency as referring to the mutually exclusive i. Sale
terms, pertaining to the scope. This is to distinguish from - What determines the nature of the transaction is the effect
“general power of attorney” or “special power of attorney.” and not the name given to the instrument
Further, the document conferring authority should be - According to Article 1458, a contract of sale is one where
referred to as “instrument” rather than “power of attorney” one party (seller) obligates himself to transfer ownership of
to avoid confusion and deliver a determinate thing, and the other party (buyer)
to pay a price certain in money or its equivalents.
II. ESTABLISHING THE AGENCY
Case: Cosmic Lumber v CA:
A. Oral or Written - Cosmic Lumber executed an SPA appointing Paz G.
VIllamil-Estrada with authority to file any court action for the
1. Oral ejectment of third persons/squatters over a certain lot and
Art. 1869 par 2. Agency may be oral, unless the law requires a to enter into a compromise agreement
specific form. - By virtue of the SPA, she filed an ejectment suit against
Perez. She then entered into an denominated as “a
GR: Agency relationships may be constituted orally compromise agreement”
Exception: When the law requires a specific form o Terms of the agreement includes the
- The difficulty lies in proving the existence of an oral acknowledgement of the principal of the ownership of
agreement in establishing an agency. Perez over the portion of the lot in consideration of a
- What is being referred to in as oral is the agency contract sum of money
or the manner by which the authorization or acceptance is - The Court thus held that given the nature of the agreement,
made the compromise agreement amounted to a sale of land.
o SIR CASIS: More accurate to render the rule as: “the o Applying Article 1874, therefore, the agreement was
contract of agency may be constituted orally and the rendered void as the agent did not have any written
authorization made by the principal or the acceptance authority to sell the land.
made by the agent may be made orally, provided that
the law does not require a specific form under the De Leon and De Leon, Jr: Article 1874 only pertains to the sale
circumstances” of a land by an agent, not a purchase.
- As long as the parties understand each other, an agency
relationship can be established simply by a conversation. Sir Casis: “a sale” can refer to the act of both buying or selling
something. Thus, “a sale through an agent” can mean that the
Case illustration - Air France v CA agent either buys or sells something for the principal. If the
Facts: Jose Gana (Director and Treasurer of Sta. Clara Lumber intention was otherwise, the Code would have used a more
Company) sought the assistance of Teresita Manucdoc specific language. The language of the article is broad enough
(Secretary) for the extension of the validity of their airline tickets. to cover both buying and selling.
She then enlisted the help of Lee Ela (Manager of Philippine - What is important though is that a principal entered into
Travel Bureau). Ella however informed Teresita that the the contract through its agent. The provision does not
extension was not possible. The Ganas however attempted to contemplate an agent merely negotiating for his principal
travel. They encountered difficulties as their tickets were (thus, this does not need a written authorization)
dishonored. As such, they sued Air France for breach of - A sale is through an agent if the agent is the signatory to a
contract. the contract on behalf of the principal.
Held: Ganas cannot defend by contending lack of knowledge on
the rules of dishonoring tickets as Teresita was duly informed Case illustration: Oesmer v Paraiso Development
that the tickets can no longer be extended without paying faire Facts: The six petitioners and two others were siblings and co-
differentials. To all legal intents and purposes, Teresita was the owners of undivided shares of two parcels of lands. Ernesto (one
agent of the Ganas. Notice, therefore, to Teresita was notice to of the six pet) met with Paraiso Development Corp to discuss
the Ganas. the possible sale of the parcels of land. All the petitioners the
Contract to Sell. However, the two other siblings did not sign the
document. The petitioners then informed Paraiso of their
intention to rescind the contract, returning the option money. of them, Eufemia, signed the deed for the 3 other co-heirs
Since Paraiso did not respond, they filed a Complaint for without their apparent written authority. The last co-heir, Virgilio,
Declaration of Nullity / Annulment of Option Agreement or refused to sign. Virgilio’s co-heirs filed a complaint for judicial
Contract to Sell. The petitioners now contend that the signatures partition of the property, and pending the proceedings, the 7 co-
of five of them did not confer authority on Ernesto as an agent heirs, through a Compromise Agreement, agreed to sell their
to sell their respective shares. undivided shares to Virgilio. But this was not approved by the
Ruling: The Court ruled against the petitioners. While the Court court because of the previous sale made to the Pahuds. Later,
noted that the signatures were not sufficient to confer authority Eufemia acknowledged having received P700k from Virgilio for
on Ernesto, the supposed Contract to Sell remains valid and the undivided shares. Virgilio then sold the entire property to the
binding upon the petitioners. This is because by affixing their Belarminos who immediately constructed a building on the
signatures on the Contract to Sell, they were not selling through property. Pahuds filed a complaint in intervention in the pending
an agent but selling the same directly and in their own right. case for judicial partition.

- Sir Casis noted that what was involved in this case was a HELD: The Court validated the contract with Pahuds on the
Contract to Sell, not a Contract of Absolute Sale. following grounds:
o A contract to sell is merely preparatory to a sale.  The admission by the heirs regarding the sale of 7/8 of
o “It seems then that the Court considers Article 1874 the property to the Pahuds
applicable to contracts to sell”  Failure of the 3 heirs to assail the validity of the
transaction, and
ii. Land or Any Interest Therein  The apparent authority given by the 3 heirs to Eufemia
by reason of their continued silence
- Note that article 1874 specifically mentions “piece of land”
and did not use the term “immovable” or “real property” Casis (agreeing with Carpio-Morales’ opinion): The reasons
- Examples of an interest on a piece of land: usufruct or cited do not justify validating an otherwise void contract. A1874
mortgage is clear.
1. At best, the admission by the heirs of the sale to
Pahuds was an admission of the fact that the contract
b. Effect was entered into and not an assertion of its legality.
 No authority of agent to sell land in writing = VOID = 2. The silence of the 3 heirs does not make it valid.
CANNOT be the subject of ratification (A1874, in Otherwise, the negligence of parties would make void
relation to A1409) contracts valid.
 AF Realty v. Dieselman: Respondents (directors of 3. The apparent authority allegedly vested by the heirs
Dieselmen) were not authorized by Dieselman does not validate the contract because this doctrine
(corporation) to sell its lot. One of the respondents only goes into the existence of either an implied agency
received the partial payment given by AF Realty over a or agency by estoppel.
piece of lot, Since the supposed contract is void, it is - Even assuming that they were, the
not susceptible of ratification by clear mandate of contract would still be void because what
A1409. is required is a WRITTEN authority to
o Thus, a contract of sale for a parcel of land or sell.
interest therein while perfectly valid, may be
rendered void if the agent who negotiated the Carpio-Morales: Equity cannot supplant or contravene the law.
sale did not have a written authority. Estoppel, being a principle of equity, cannot be applied in the
 But the requirement that the agent’s authority be in presence of a law clearly applicable to the case.
writing may be subject to interpretation: does it refer to  Rationale behind A1847: not only to safeguard the
agent’s appointment, or to agent’s authority to sell the interest of the unsuspecting owner from being
land, that has to be in writing? prejudiced, but also to caution the buyer to assure
o Rationale behind the rule: protect the parties himself of the specific authorization of the putative
involved in the sale agent
o Considering the rationale, then it should be
sufficient that the authority in writing reflect Art. 1874 Art. 1878
the IDENTITY of the agent, PROPER Agent’s authority for the sale Agent’s authority to enter into
DESCRIPTION of land, and TERMS of sale, of land must be in writing certain transactions involving
if any. acts of strict dominion must
 Such an instrument would be a be embodied in a special
special power of attorney even if power of attorney
appointment of the agent, originally,
was merely oral.
 Effect of absence of written authority only goes into the c. Form in the Case of Corporations
VALIDITY of sale, NOT the validity of the agency  Written authorization generally must be in the form of a
contract or that the agency relationship does not exist. BOARD RESOLUTION
 NO EXCEPTION to the rule, BUT in the case of Pahud  Litonjua v. Eternit: A corporation may only act through
v. CA, the Court upheld a deed of sale even if the agent its board of directors or, when authorized either by its
did not have any written authority, on the basis of BY-LAWS or by its BOARD RESOLUTION, through its
ESTOPPEL. officers or agents in the normal course of business. The
general principles of agency govern the relation
PAHUD v. CA between the corporation and its officers or agents.
FACTS: A Deed of Absolute Sale of Undivided Shares over a
parcel of land in favor of Pahuds was executed by 4 of 8 siblings AF REALTY v. DIESELMAN
(the land was inherited by the 8 children from their parents). One
FACTS: Manuel, a member of the board of directors of
Dieselman, authorized a real estate broker to negotiate the sale b. Implied from the Acts of the Agent (A1870)
of a lot owned by Dieselman, even if Manuel had no written  FORMS:
authority from Dieselman to sell the lot. AF Realty, the buyer of o His acts which carry out the agency (A1870)
the lot, filed a complaint for specific performance and damages o Silence or inaction according to the
before RTC after the president of Dieselman terminated the offer circumstances (A1870)
and demanded the return of the title of the lot. o When the principal DELIVERS his power of
attorney to the agent who receives it in the
HELD: Against AF Realty. Even a director requires a board presence of the principal without any
resolution to authorize him to authorize another for the sale in objection (A1871)
question. Since there was no written authority from all the o Between persons who are absent, when the
members of the board of directors, Manuel lacks authority and principal TRANSMITS power of attorney to
is precluded from conferring authority to other persons for the the agent who receives it without any
same purpose. objection (A1872(1))
o Between persons who are absent, when the
B. Express/Implied Agency and Agency by Estoppel principal ENTRUSTS to him by LETTER or
 Consent of the parties in the establishment of an TELEGRAM a power of attorney with respect
agency is manifested EXPRESSLY or IMPLIEDLY to the business in which he is habitually
o Refers to the MANNER by which the agency engaged as an agent, and he did not reply to
is established, or HOW the agent accepts the letter or telegram (A1872(2))
appointment.  Situation contemplated: The principal EXPRESSLY
appoints the agent but the latter only IMPLIEDLY
1. Express Agency (A1869) ACCEPTS
 The usual manner is that agency relationship is  Difficulty in applying provision: Regarding implied
established/created by: agency established by silence or inaction, HOW MUCH
o EXPRESS ACT of PRINCIPAL authorizing TIME does an alleged agent have to reject the agency
the agent to act on his behalf, AND before an implied agency is established?
o EXPRESS ACT of AGENT accepting such  Thus, it is reasonable for an implied agency to be
authority established through silence or inaction if the alleged
agent DOES NOT INFORM THE PRINCIPAL of his
2. Implied Agency rejection of the agency relationship:
 Agency relationship may be implied from the acts of the a. Within a reasonable amount of time
PRINCIPAL or of the AGENT. under the circumstances; and
b. Prior to the principal suffering damage as
a. Implied from the Acts of the Principal (A1869) a result of the delay on the part of the
 FORMS: agent in informing the principal of his
o Silence rejection of the agency relationship
o Lack of action
o Failure to repudiate the agency Art. 1871 Art. 1872
knowing that another person is acting on his Agent impliedly accepts Agent impliedly accepts
behalf without authority (A1869) agency in the PRESENCE of agency in the ABSENCE of
 Situation contemplated: A person who is NOT the principal the principal
authorized to act as agent NEVERTHELESS Implied agency is the The two scenarios allowing
PERFORMS the acts of an agent on behalf of another GENERAL RULE (between implied agency are
 Difficulty in applying provision: In determining the persons who are present) EXCEPTIONS rather than
REASONABLE PERIOD for INACTION on the part of the general rule (between
the alleged principal, i.e. HOW LONG does the persons who are absent)
principal need to know about the unauthorized agent’s Principal DELIVERS power Principal either TRANSMITS
actions for the provision to apply? And, in WHAT of attorney to agent power of attorney or
MANNER is the alleged principal supposed to ENTRUSTS it by letter or
repudiate the alleged agency relationship? telegram
 REQUISITES: Agent’s physical receipt of If entrusted by letter or
a. The alleged principal should be aware of the document without specific telegram, the power of
acts of the alleged agent knowledge of document attorney should pertain to a
b. The alleged principal has reasonable containing power of attorney business that the agent is
opportunity under the circumstances to NOT SUFFICIENT to bind habitually engaged in (not
repudiate the acts of the alleged agent him required in TRANSMITTAL)
c. A third party has transacted with the alleged
agent without being made aware of the
alleged agent’s lack of authority
d. There were no facts or circumstances that
should have raised any suspicion on the part
of the third person that the agent was not
authorized
 Uniland Resources v. DBP: A1869 did not apply
because both the alleged principal and the alleged
agent knew that the agent was not authorized to act
and that no 3rd party is prejudiced by the alleged
principal’s non-recognition of the alleged agency.