CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art.

1868

cipal would still be BOUND “when the contract involves

things BELONGING to the principal.” (Art. 1883, 2nd
par., Civil Code).

TITLE X [THUS, Justice J.B.L. Reyes had stated that “this

article does not draw clearly the distinction between lease
of services and agency without representation. The laborer
AGENCY also does something or renders service on behalf of another.
The true essence of the distinction, it is submitted, lies in
that the agent enters or is designed to enter judicial rela-
Chapter 1 tions, with or without representation of the principal.”
(Justice Jose B.L. Reyes’ Observation on the new Civil Code,
NATURE, FORM, AND KINDS OF AGENCY XVI Lawyers Journal, Mar. 31, 1951, p. 138).]

Bert Osmeña and Associates

v. Court of Appeals
Art. 1868. By the contract of agency a person binds GR 56545, Jan. 28, 1983
himself to render some service or to do something in rep-
resentation or on behalf of another, with the consent or When a man designates himself as the seller in
authority of the latter. a contract of sale (and not merely as the agent of the
seller), and he alone signs the contract, he will be re-
COMMENT: garded as the seller with resultant liabilities as such
(e.g., for damages).
(1) Defective Definition of the Contract of Agency
The definition of AGENCY given in Art. 1868 is very Alfred Hahn v. CA & Bayerische
broad, and therefore, defective. Motoren Werke Aktiengesellschaft (BMW)
GR 113074, Jan. 22, 1997
(a) As worded, the definition includes the relationship of 78 SCAD 240
master and servant, of employer and employee, of lessor
and independent contractor. The servant, the employee, FACTS: As to the service centers and showrooms
and the independent contractor all render some work or which he said he had put up at his own expense, petitioner
service in representation or on behalf of another. Hahn said that he had to follow BMW specifications as
exclusive dealer of BMW in the Philippines. According
(NOTE: What the agent really does for the principal
to Hahn, BMW periodically inspected the service to see
is a JURIDICAL ACT, and not merely a material one. In
to it that BMW standards were maintained. Indeed, it
other words, while an agent may exercise discretionary
would seem from BMW’s letter to Hahn that it was for
powers, the lessee of services ordinarily performs only
Hahn’s alleged failure to maintain BMW standards that
ministerial functions.)
BMW was terminating Hahn’s dealership.
(b) As worded, it would seem that the agent must always
HELD: The fact that Hahn invested his own money
expressly represent the principal. This is not necessarily
to put up these service centers and showrooms does
so, for sometimes an agent does not disclose his principal;
not necessarily prove that he is not an agent of BMW.
he may even act in behalf of himself, but here the prin-
For as noted, there are facts in the record which sug-

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Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1868

gest that BMW exercised control over Hahn’s activities present in many places and to carry on diverse activities at
as a dealer and made regular inspections of Hahn’s the same time. (Mechem, Outlines of Agency, 3rd ed., p. 5).
premises to enforce compliance with BMW standards and
specifications. An agent receives a commission upon the
Smith, Bell & Co., Inc. v. CA
successful conclusion of a sale. Upon the other hand, a
broker earns his pay merely by bringing the buyer and GR 110668, Feb. 6, 1997
the seller together, even if no sale is eventually made. 79 SCAD 38

Every cause of action ex contractu must be founded upon

(2) Other Definitions a contract, oral or written; either express or implied. The only
(a) “An agency may be defined as a contract either express involvement of petitioner in the subject contract of insurance
or implied upon a consideration, or a gratuitous under- was having its name stamped at the bottom left portion of the
taking, by which one of the parties confides to the other, policy as “Claim Agent.” Without anything else to back it up,
the management of some business to be transacted in such stamp cannot even be deemed by the remotest interpre-
his name or on his account, and by which that other tation to mean that petitioner participated in the preparation
assumes to do the business and renders an account of of said contract. Hence, there is no privily of contract, and
it.” (2 Am. Jur. 13). correspondingly there can be no obligation or liability, and,
thus, no cause of action against petitioner attaches.
(b) “Agency is the relationship which results from the mani-
festation of consent by one person to another that the The Insurance Code is quite clear as to the purpose
other shall act on his behalf and subject to his control, and role of a resident agent. Such agent, as a representative
and consented by the other so to act.” (Restatement of of the foreign insurance company, is tasked only to receive
the Law of Agency, Sec. 1). legal processes on behalf of its principal and not to answer
personally for any insurance claims.
(c) “Agency is an act which one person gives to another
the power to do something for the principal and in his
name.” (French Civil Code; Holland, Jurisprudence, 12th (5) History
Ed., 302-303).
Formerly, there was a difference between a commercial
(3) Roman Law agency or commission on the one hand, and a civil agency
on the other. A commercial agency was entered into for com-
In Roman Law, there was the contract of mandatum mercial purposes; the civil agency, for other objectives.
where one person called mandans authorized another called
the mandatarius to do something for him. This originated Today, however, there is no more commercial agency or
from the obligation or right of a son or a slave to represent commission in view of the repeal by the new Civil Code of
the pater familias. (Holland, Jurisprudence, pp. 302-303). the Code of Commerce provisions thereon. (Art. 2270). There-
fore, today, whether the agency be for a civil or a commercial
(NOTE: In Spanish, the principal is called mandante, purpose, it is now called a civil agency, and is governed by
while the agent is referred to as the mandatario. The contract the Civil Code.
itself is a mandato.)

(4) Importance of Agency (6) Characteristics

It enables a man to increase the range of his individual (a) Agency is a principal, nominate, bilateral, preparatory,
and corporate activity by enabling him to be constructively commutative, and generally onerous contract.

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Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1868

(b) Generally, it is also a representative relation, not a status someone else, he is not an agent, for here he certainly
since agency is not inherent or permanent. acts in his own name.)
(c) It is a fiduciary relation since it is based on trust and (NOTE: An agent may have his own agent, who is
confidence. (See Severino v. Severino, 44 Phil. 343). thus referred to as sub-agent.)

Gelano v. Court of Appeals

Philpotts v. Phil. Mfg. Co., et al. L-39050, Feb. 24, 1981
40 Phil. 471 103 Phil. 90
FACTS: W.G. Philpotts, a stockholder of the Philip- The word “trustee” as used in the corporation
pine Manufacturing Co., wanted to inspect the corporate statute must be understood in the general concept, and
books thru his agent, but the Company refused, stating may include the attorney prosecuting the case filed by
that this right to inspect the books was purely personal, the corporation.
and could not be exercised thru an agent. Philpotts pe-
titions for a writ of mandamus to compel the PMC to (8) Capacity of the Principal
show its books to his agent.
(a) In general, if he is capacitated to act for himself, he can
HELD: Mandamus can be issued, for the inspection act thru an agent. He must, therefore, be capacitated to
can be done thru an agent. This is in conformity with give consent. (2 C.J. 429-430). If any special capacity is
the general rule that what a man may do in person, he needed, it is he who must possess it and not the agent,
may do thru another. Nothing in the Corporation Law for the latter merely acts in his behalf.
is contrary to this general rule.
(b) The principal may be natural or a juridical person. (As
[NOTE: Some acts cannot however be made thru a matter of fact, a private corporation and a partnership
an agent. An example is the making of a will, since this can only act thru agents.) (Mechem, p. 33).
is considered a strictly personal act under the law.]
(NOTE: A social club or any other organization
(7) Parties to the Contract cannot act as a principal if it has no juridical personal-
ity. Individual members thereof can be bound only if an
The two parties to the contract are the principal and express or implied agency has been consented to by each
the agent. of them.)
Definitions: (c) Generally, an emancipated minor can be a principal. So
may a married woman. As a matter of fact, the husband
(a) Principal — he whom the agent represents and from
may appoint her as agent or administrator of his capi-
whom he derives authority; he is the one primarily
tal or of the conjugal partnership. Similarly, a married
concerned in the contract. (Sec. 3, 2 C.J. 420).
woman may appoint her husband as an agent of her
(b) Agent — he who acts or stands for another. Usually, he paraphernal property.
is given full or partial discretion, but sometimes he acts
(d) A husband, as administrator of the conjugal partnership
under a specific command. (Bishop on Contracts, Sec.
(Art. 165, Civil Code) is in that sense an agent who
1027). can bind conjugal property, subject to legal restrictions,
(NOTE: He, therefore, acts in another’s name. If he such as those imposed by Art. 166, Civil Code. Thus, a
acts under another name, that is, if he pretends to be conveyance of conjugal real property without the needed

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Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1868

consent of the wife is VOIDABLE, and the wife is given conveyance of the properties of a corporation to a trustee
ten years within which to bring an action for annulment. to enable it to prosecute and defend suits by or against the
(Rodolfo Lanuza v. Martin de Leon, L-22331, Jun. 6, corporation beyond the three-year period.
1967). Ratification may of course be made by the wife.
(Ibid.) (10) Distinctions
(a) Agency from Partnership
(9) Capacity of an Agent
An agent acts not for himself, but for his principal;
His capacity is in general the same as in the law of
a partner acts for himself, for his firm, and for his part-
contracts, that is, he must be able to bind himself, but only
ners. It may even be said that partnership is a branch
insofar as his obligations to his principal are concerned. In-
of the law on agency.
sofar as third persons are concerned, however, it is enough
that his principal be the one capacitated, for generally an (b) Agency from Loan
agent assumes no personal liability. Usually, therefore, the
An agent may be given funds by the principal to
contract with a stranger is valid, even if the agent be a minor
advance the latter’s business, while a borrower is given
so long as his principal was capacitated. However, as between
money for purposes of his own, and he must generally
them (principal and agent), the minor-agent can set up his
return it, whether or not his own business is successful.
incapacity, provided he is not in estoppel.
A lot however depends on the intent of the parties. (2
CJS 1030).
Mendoza v. De Guzman
33 O.G. 1505
Atcheson R. Co. v. Maber
FACTS: P appoints A, a minor, as his agent to sell certain 23 Kan. 163
goods. A sells the goods to a buyer B. P afterwards seeks to
disaffirm the sale, and brings an action to recover the goods FACTS: A furnished B with money for current
on the ground that A’s act was void, as an infant cannot be expenses. B was obliged to render monthly accounts of
an agent. Judgment for whom and why? such expenses to A. It was also agreed that eventually
B would pay for them. B then obtained goods from C on
HELD: Judgment should be for the buyer B and against credit. Issue: May C sue A on the theory that A is B’s
the principal P. The agent A is deemed to be an extension principal, and that B is only an agent?
of the personality of the principal, who himself is of legal
age. Hence, P cannot avoid the contract on the ground of the HELD: No, for it is clear that B was a borrower,
agent’s incapacity. not an agent of A.
(c) Agency from Guardianship
Gelano v. Court of Appeals
L-39050, Feb. 24, 1981

A lawyer who has been defending the interests of a AGENCY GUARDIANSHIP

corporation may, in the case of a litigation in court still
pending after the expiration of the three-year period after 1) The agent represents a 1) A guardian repre-
dissolution, still continue as TRUSTEE of the corporation at capacitated person. sents an incapaci-
least with respects to the matter in litigation. This would tated person.
be in substantial compliance with the law which allows the

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Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1868

(e) Agency from Lease of Property

2) The agent is appointed 2) The guardian is ap-
by the principal and pointed by the court,
can be removed by the and stands in loco AGENCY LEASE OF PROPERTY
latter. parentis.
3) The agent is subject 3) The guardian is NOT 1) The agent is controlled 1) The lease is not con-
to the directions of the subject to the direc- by the principal. trolled by the lessor.
principal. tions of the ward, but 2) The agency may involve 2) Obviously, a lease
must of course act for things other than prop- of property involves
the benefit of the lat- erty. property only.
ter.
3) The agent can bind the 3) The lessee, as such,
4) The agent can make 4) The guardian has principal. cannot bind the lessor.
the principal personally no power to impose
liable. personal liability on
the ward. (See Mechem, p. 16; 2 C.J. 246).

(See 2 Am. Jur. 15 and 18 Fessenden v. Jones, 52 N.C.

14). Hawley v. Curry
74 Ill. A. 309
(d) Agency from Judicial Administration
FACTS: A Bon was allowed by his father to use
the latter’s land and to make improvements on it. The
AGENCY JUDICIAL son was also authorized to get profits as a result of
ADMINISTRATION whatever improvements may be introduced. One day,
the son purchased certain materials which he needed
1) Agent is appointed by 1) Judicial administrator for the improvements. Is the father liable?
the principal. is appointed by the
court. HELD: The father is not liable, since he did not
constitute his son his agent. The relationship between
2) He represents the prin- 2) He represents not only them insofar as the land is concerned is similar to that
cipal. the court but also the of lessor and lessee, not that of principal and agent.
heir and creditors of
the estate.
State v. Page
3) Agent generally does 3) The administrator files
40 Am. D. 608
not file a bond. a bond.
4) Agent is controlled by 4) His acts are subject FACTS: A hotel and X entered into a contract which
the principal thru their to specific orders from allowed the latter to keep the hotel for 7 years. X was to
agreement. the court. reside in the hotel with his family, but would be allowed
free rent and board. X’s duty was to run the hotel with
books of account subject to inspection by the board of
(See San Diego v. Nombre & Escamlar, L-19265, May 29, directors of the hotel. X was also authorized to hire a
1964).
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Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1868

bookkeeper, who however could be discharged by him, at (g) Agency from a Contract with an Independent Contrac-
the instance of the board of directors. X was forbidden tor
to contract debts in behalf of the hotel without prior
permission from the hotel board. Issue: Is X a lessee or AGENCY INDEPENDENT
an agent? CONTRACTOR

HELD: It is clear from the foregoing facts that X 1) The agent acts under 1) The independent con-
is not a lessee. He is an agent, subject to the control of the control of the prin- tractor is authorized
the board of directors of the hotel. cipal. to do the work accord-
ing to his own method,
(f) Agency from Lease of Services (or Master-Servant Rela- without being subject
tionship) to the other party’s
control, except inso-
far as the RESULT of
the work is concerned.
AGENCY LEASE OF SERVICES (Fressel v. Uy Chaco
and Sons, 34 Phil.
1) Agent represents the 1) The worker or the les- 122).
principal. sor of services does 2) The agent of the agent 2) The employees of the
not represent his em- may be controlled by contractor are not the
ployer. the principal. employees of the em-
2) Relationship can be 2) Generally, the rela- ployer of the contrac-
terminated at the will tionship can be termi- tor. (Mechem, pp. 13-
of either principal or nated only at the will 14).
agent. of both. 3) Agent can bind the 3) Ordinarily, the in-
3) Agent exercises discre- 3) The employee has min- principal. dependent contractor
tionary powers. isterial functions. cannot bind the em-
ployer by tort. (Mec-
4) Usually involves 3 per- 4) Usually involves only hem, pp. 13-14).
sons: the principal, the two persons.
agent, and a stranger. 4) The negligence of the 4) The negligence of the
agent is imputable to independent contrac-
the principal. (Shell Co. tor is generally not
v. Firemen’s Ins. Co., imputable to his em-
(See Mechem, p. 11).
100 Phil. 757). ployer.
(NOTE: It should be understood however that an
agent may incidentally render acts of service, while a
lessor of services or employee may incidentally make Shell Co. v. Firemen’s Ins. Co.
contracts.) 100 Phil. 757

FACTS: Operators of gasoline station owned by the

Shell Company sell only products of the company; use

774 775
Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1868

company equipment lent to them; dispose of stock at (i) Agency from Trust
prices fixed by the company; are in fact appointed and
are removable by the company. If said operators by their AGENCY TRUST
negligence cause damage to third parties, will the Shell
Company be liable? 1) Agent usually holds no 1) Trustee may hold legal
title at all. title to the property.
HELD: Yes, for clearly, they are agents, not in-
dependent contractors. The negligence of an agent if 2) Usually, agent acts in 2) The trustee may act in
certainly imputable to the principal. the name of the prin- his own name.
cipal.
(h) Agency from Negotiorum Gestio 3) Usually, agent may be 3) The trust is usually
terminated or revoked ended by the accom-
at any time. plishment of the pur-
AGENCY NEGOTIORUM poses for which it was
GESTIO formed.
4) Agency may not be 4) Trust involves control
1) There is a contract 1) This is only a quasi- connected at all with over property.
caused by a meeting of contract, there having property.
the minds, expressly or been no meeting of
5) Agent has authority to 5) Trustee does not nec-
impliedly. the minds. Hence, the
make contracts which essarily or even pos-
representation was not
will be binding on his sess such authority to
agreed upon.
principal. bind the trustor or the
(NOTE: Once there is cestui que trust.
an agreement or ratifi- 6) Agency is really a con- 6) A trust may be the re-
cation, there arises an tractual relation.
express agency.) sult of the contract or
not; it may be created
2) Agent is controlled by 2) The officious manager also by law.
the principal. follows his judgment
and the presumed will
of the owner. (j) “Agency to Sell” from Sale

(NOTE: The manager AGENCY TO SELL SALE

is of course supposed
to act with due dili- 1) Ownership of the goods 1) Ownership is trans-
gence.) is not transferred to the ferred to the buyer
agent. (after delivery).
3) The legal relation is 3) The legal relation is
created by the parties. created by the law (oc- 2) Here, the agent DELIV- 2) The buyer PAYS the
casioned of course by ERS the price. price.
the acts of the man-
(See Quiroga v. Parsons, 38
ager).
Phil. 501).

776 777
Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1868

[NOTE: The mere testimony of the person who sale, but an agency to sell or a contract of CONSIGN-
drafted the contract that it was one of agency is of no MENT. (Brown v. John Church Co., 55 Ill. App. 615).]
importance, for a contract is what the law defines it to
(k) “Agency to Buy” from Sale
be, and not what it is called by the contracting parties.
(Quiroga v. Parsons, 38 Phil. 501).]
SALE AGENCY TO BUY
Quiroga v. Parsons Hardware Co.
38 Phil. 501
1) The buyer acquires 1) The agent acquires
FACTS: Quiroga granted Parsons (in the Visayas) ownership for himself. ownership in behalf of
exclusive right to sell “Quiroga” bed in the Visayas. Qui- the principal.
roga was to furnish beds to Parsons, and would demand 2) The buyer who obtains 2) The agent must ac-
the price sixty days from shipment, minus a commission a discount does not count for all benefits
or deduction of 25%. Parsons agreed not to sell any other have to reveal such or discounts received
kind of bed, and to pay the price as agreed upon. Issue: Is fact to its own buyer. from the seller.
this a contract of agency to sell, or a contract of sale? (See Gonzalo Puyat
HELD: This is a contract of SALE. In order to and Sons, Inc. v. Arco
classify a contract, due regard must be given to its es- Amusement Co., 72
sential clauses. In the contract in question, what was Phil. 402).
essential, as constituting its cause and subject matter, is 3) The buyer pays the 3) The agent delivers the
that Quiroga was to furnish the Parsons with the beds, price. price.
which the latter might order at the price stipulated. The
price agreed upon was the one determined by Quiroga
Gonzalo Puyat and Sons, Inc. v. Arco
with a certain discount. Payment was to be made at
Amusement Co.
the end of sixty days. These are precisely the essential
72 Phil. 402
features of a contract of purchase and sale. There was
the obligation on the part of Quiroga to supply the beds, FACTS: Gonzalo Puyat and Sons was the exclu-
and on the part of Parsons to pay their price. These sive agent of an American Piano Company, the Starr
features exclude the legal conception of an agency or Piano Company of Richmond, Indiana, U.S.A. The Arco
order to sell whereby the mandatary or agent received Amusement entered into a contract with Puyat and Sons,
the thing to sell it, but does not pay its price. Instead, whereby the latter would order, on behalf of the Arco
he is supposed to deliver to the principal the price he Amusement Company, certain sound equipment. It was
obtains from the sale of the thing to a third person, and also agreed that the company would pay Puyat and Sons
if he does not succeed in selling it, he returns it. By a 10% commission, plus all expenses.
virtue of the contract between Quiroga and Parsons, the
latter, on receiving the beds, was necessarily obliged to Puyat and Sons cabled the U.S. company for the
pay their price within the term fixed, without any other price without discount. The price given was P1,700. Puyat
consideration, and regardless as to whether he had or and Sons, with the approval of the Amusement Company,
had not sold the beds. placed the order when it came. Puyat and Sons received
P1,700 from the company plus 10%. Puyat and Sons
[NOTE: If there is an agreement to return all unsold however did NOT reveal to the Amusement Company
goods, with no obligation to pay for them, this is not a that the former was always given a DISCOUNT by the

778 779
Art. 1868 CIVIL CODE OF THE PHILIPPINES CIVIL CODE OF THE PHILIPPINES Art. 1869

U.S. Company. When the amusement Company discov- his pay merely by bringing the buyer and the seller together,
ered that the P1,700 was only the list price, and not the even if no sale is eventually made. (Alfred Hann v. CA &
net price, it sued Puyat and Sons for reimbursement of Bayerische Motorer Worke Aktiengesellschaft [BMW], 266 SCRA
the difference, on the ground that the latter was only 537 [1997]).
its AGENT in obtaining the equipment. Puyat and Sons
A broker is “one who is engaged, for others, on a com-
however countered that the contract was not an agency to
mission, negotiating contracts relative to property with the
buy, but was one of sale. Issue: Is the contract between
custody of which he has no concern; the negotiator between
them a sale, or an agency to buy?
other parties, never acting in his own name but in the name
HELD: The contract between them is a SALE, and of those who employed him. A broker is one whose occupation
not an agency to buy; therefore, Puyat and Sons will not is to bring the parties together, in matters of trade, commerce,
be required to reimburse the difference. It is clear from or navigation.” (Schmid & Oberly v. RJL Martinez Fishing
the facts that had there been a change of price upwards Corp., 166 SCRA 493 [1988]).
or a mistake, Puyat and Sons would have been required
to give the equipment to the Arco Amusement Co. at Art. 1869. Agency may be express, or implied from the
only the agreed amount of P1,700 plus 10%. It follows acts of the principal, from his silence or lack of action, or
therefore that Puyat and Sons could not have been an his failure to repudiate the agency, knowing that another
agent of the Amusement Company, for a true agent is person is acting on his behalf without authority.
entitled to indemnity for damages incurred in carrying
out the agency without fault, that Puyat and Sons was Agency may be oral, unless the law requires a specific
to receive a 10% commission, this does not necessarily form.
make it an agent of the Amusement Company. The pro-
vision only meant that the Amusement Company bound COMMENT:
itself to pay an additional price. This stipulation is not (1) Kinds of Agency According to Manner of Constitution
incompatible with the contract of purchase and sale.
(a) express
Moreover, since it is an admitted fact that Puyat
(b) implied — from
and Sons was the agent of the U.S. Company, it is out
of the ordinary for it to be also the agent of the Amuse- 1) acts of the principal;
ment Company. Seldom is the seller also the agent of the 2) principal’s silence;
buyer.
3) principal’s lack of action;
(NOTE: A similar ruling was made in a WHISKY
4) principal’s failure to repudiate the agency.
transaction in Velasco v. Universal Trading Co., Inc., 45
O.G. 4504). (NOTE: In these cases of implied agency the prin-
cipal knows that another person is acting on his behalf
(11) ‘Agent’ and ‘Broker’ Distinguished without authority.)

Manuel B. Tan, Gregg M. Tecson & Alexander De la Peña v. Hidalgo

Saldaña v. Eduardo R. Gullas & Norma S. Gullas 16 Phil. 450
GR 143978, Dec. 3, 2002
FACTS: The properties of De la Peña were being
An agent receives a commission upon the successful administered by his agent Federico Hidalgo, who, for
conclusion of a sale. Upon the other hand, a broker earns reasons of health, informed De la Peña that he (Fed-

780 781