Nature, Form and Kinds of Agency

7/30/2019 Nature, Form and Kinds of Agency

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Agency:A relationship which implies a power in an agent to

contract with a 3rd person on behalf of a principal.

The basis is representation not form of service or

employment.Phrase for or in our behalf does not necessarily

establish an agency. What is decisive is the intention of

the parties.


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Kind of Contract:

It is a preparatory contract. It is a contract entered not for

its own end but to be able to enter into other contracts.

Essential Elements of Agency:

1.) Consent, express or implied;

2.) Objectof the contract is the execution of a juridical act inrelation to 3rd persons;

3.) The agent acts as a representativeand not for himself;

4.) The agent acts within the scope of his authority.


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Characteristics:

1.) Consensual: perfected by mere consent;

2.) Nominate: it has its own name;

3.) Principal: does not depend on another contract for its existence and validity;

4.) Preparatory: entered into as a means to an end;

5.) Unilateral/Bilateral:

a.) Unilateral: if contract is gratuitous, it creates obligations for only one of theparties, i.e. agent.

b.) Bilateral: if for compensation, it gives rise to reciprocal rights and obligations.

6.) Generally Onerous (Art. 1875)

7.) Fiduciary: as it is based on trust and confidence

8.) Representative Relation: not a personal one in relation to third person


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Basis:

Representation-The acts of the agent on behalf of the principal

within the scope of his authority produce the same legal and bindingeffects as if the principal personally did them.

Distinguishing Features:

1.) Representative character; and

2.) Derivative authority.

Purpose:

To extend the personality of the principal through the

facility of the agent (constructive representation)


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Parties:

1.) Principal the party represented

2.) Agent the party who represents the principal

3.) Sub-agent agent of the agent; the contract of agency may prohibitthe agent from appointing a sub-agent

Who can be principal?

The principal may be a natural person or a juridical person. He must be

capacitated.

The rule is if a person is capacitated to act for himself or in his own right,

he can act through an agent.


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Must the agent have capacity?

Insofar as 3rd persons are concerned, it is enough that the principal is

capacitated; but insofar as his obligations to his principal are

concerned, the agent must be able to bind himself.

Acts that cannot be done through an agent:

1.) Personal acts: if personal performance is required by lawor public policy or agreement;

2.) Criminal or illegal acts: attempt to delegate anotherauthority to do an act which, if done by the principal would be

illegal, is void.


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Agency v. Lease of Work or Service

Agency Lease of Work/Service

Basis is representation. Basis is employment

Agent exercises discretionary

powers.

Lessor only performs ministerial

functions.

3 persons are involved:

principal, agent & 3rd person.

Only 2 persons involved: lessor

and lessee

Commercial or business

transactions.

Matters of mere manual or

mechanical execution.


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Agency v. Guardianship

Agency Guardianship

Agent represents a capacitated

person.

Guardian represents an

incapacitated person.

Agent appointed by principal

and can be removed by him.

Agent appointed by principal

and can be removed by him.

Agent subject to directions of

principal.

Guardian not subject to

directions of ward but must actfor his benefit.

Agent can make principal

personally liable.

Guardian has no power to

impose personal liability on his

ward.


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Agency to sell Sale

Agent receives the goods as

the goods of the principal.

Buyer receives the goods as

owner.

Agent delivers proceeds of thesale.

Buyer pays the price.

Agent can return object in case

he is unable to sell to a 3rd

person.

Generally, buyer cannot return

the object sold.

Agent in dealing with the thing

received is bound to act accdg

to the instructions of his

principal

Buyer can deal with the thing

as he pleases, being the

owner.

Agency to Sell v. Sale


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Agent Independent Contractor

Represents the principal. Employed by employer.

Acts under the control and

instructions of the principal

Acts according to his own

method.

Principal liable for torts

committed by agent w/in scope

of authority.

Employer not liable for torts

committed by independent

contractor.

Agent v. Independent Contractor


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Agent Partner

Acts for the principal nor for

himself

Acts for himself, the firm and

co-partners.

Partnership is a branch on the

law on agency

Agency v. Partnership

Agency v. Negotiorium Gestio

There is meeting of the minds No meeting of the minds

Agent is under the control of

the principal

Acts according to his own

sound discretion

Created by agreement Created by law


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Arises from contract May be generated by contract

or not, or by law

Agent holds no title over theproperty

Trustee may hold title over theproperty

May be revoked anytime Terminated upon the

accomplishment of the purpose

to which it was formed orestablished

Agency v. Trust


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Art. 1869. Agency must be express, or implied fromthe acts of the principal, from his silence or lack ofaction, or his failure to repudiate the agency,knowing that another person is acting on his behalfwithout authority.

Agency may be oral, unless the law requires aspecific form.


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Classifications of Agency:as to

a) Express: actually authorized, either (i.) orally or in( ii.)writing.

b.) Implied: implied from (i.) acts of principal,(ii.) from his

silence or lack of action or (iii.) his failure to repudiatethe agency knowing that another person is acting on his

behalf w/o authority. The enumeration is not exclusive,

there may be other situation of implied agency

1.) Manner of Creation:


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2.) Character or Consideration:

a.) Gratuitous: agent receives no compensation for hisservices.

b.) Onerous: agent does receive compensation.

3.) Extent of business covered:

a.) General: comprises all the business of the principal.

b.) Special: comprises one or more specific transactions.


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a.) Couched in general terms: deemed to comprise

only acts of administration.

b.) Couched in specific terms: authorizes only theperformance of a specific act/s.

4.) Authority conferred or Management

5.) Nature and effects:

a.) Representative: agent acts in name and representation

of principal.

b.) Simple/Commission: agent acts in his own name butfor the account of the principal.


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c. ) Conventional: created by agreement of the parties

d.) Legal: formed by operation of law (Art. 1803, 1884par 2,1885, 1929 and 1932)

6.) As to manner of Appointment

a.) Direct:the principal appointed the agentdirectly

b.) Indirect:appointment is through anotherperson (Art. 381)


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Can agency be presumed?

Generally NO. Because the relationship between the principal and

agent must exist as a fact. The only exceptions to this rule are

when agency arises by operation of law or agency is presumed to

prevent unjust enrichment.

Form:

Generally NO formal requirements. Agents authority may be

oral or written; it may be in public or private writings. The only

exception is when the law requires a specific form (e.g. sale of

real property or any interest therein by an agent.)


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Art. 1870. Acceptance by the agent may also beexpress, or implied from his acts which carry out theagency, or from his silence or inaction according tothe circumstances.

Acceptance:

A person has a right to represent or reject his appointment as anagent. It is only in legal agency where he cannot refuse the

creation of the agency because the law dictates.

Form of Acceptance by Agent:

Acceptance may be express or implied; express when it is oral orwritten; implied when it can be inferred from the acts of the agentwhich carry out the agency, or from his silence or inaction according

to the circumstances.


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Art. 1871. Between persons who are present, theacceptance of the agency may also be implied if theprincipal delivers his power of attorney to the agent

and the latter receives it without any objection.

Between 2 persons who are present, when itacceptance deemed implied?

When the agent receives a power of attorney from the principal

himself personally without objection.

Is this presumption conclusive?

NO, it can be rebutted by contrary proof.


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Power of attorney: An instrument in writing by which one

person, as principal, appoints another as his agent and confers

upon him the authority to perform certain specified acts or kinds of

acts on behalf of the principal. Its primary purpose is to evidence

the authority of the agent to 3rd parties w/ whom the agent deals.

Construction:

A power of attorney is strictly construed and strictly pursued. The

instrument will be held to grant only those powers which arespecified, and the agent may neither go beyond nor deviate from the

power of atty. The only exception is when strict construction will

destroy the very purpose of the power.


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Except as may be required by statute, a power of attorney is valid

although no notary public intervened in its execution (Lim Pin v. Liao

Tan, 115 SCRA 296)

Art. 1872. Between persons who are absent, theacceptance of the agency cannot be implied from thesilence of the agent, except:

1.) When the principal transmits his power of attorney tothe agent, who receives it without any objection;

2.) When the principal entrusts to him by letter or telegrama power of attorney with respect to the business in whichhe is habitually engaged as an agent, and he did not replyto the letter or telegram.


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Distinction between Article 1871 and 1872

Basis 1871 1872

Condition of

creation

Both the principal and agent

are present

Both the principal and

the agent are absent

Manner of

delivery

The Power of attorney is

personally delivered by the

principal to the agent

The Power of

Attorney is not

personally delivered.

There is transmission

by messenger, letter

or telephone


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Art. 1873. If a person specially informs another orstates by public advertisement that he has given apower of attorney to a third person, the latter therebybecomes a duly authorized agent, in the former casewith respect to the person who received the specialinformation, and in the latter case with regard to any

person.

The power shall continue to be in full force until thenotice is rescinded in the same manner in which it wasgiven.


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2 Ways of Giving Notice of Agency

1.) By special information; or

2.) By public advertisement.

Effects:

1.) Special information: the person appointed as agent is

considered such with respect to the person to whom it was

given.

2.) Public advertisement: Agent is considered such with

regard to any person.


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Revocation An agency is revoked in the same manner as itwas given.

General rule: Special information needs special informationof revocation.

Except: if you can prove that the 3rd person read the noticein the newspaper.

There is really no agency at all, but the alleged agentseemed to have apparent or ostensible, although no realauthority to represent another.

Agency by Estoppel:


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One professing to act as agent for another may be estopped

to deny his agency both as against his asserted principal

and the 3rd persons interested in the transaction in which he

is engaged.

2.) Estoppel of Principal

a.) As to Agent One who knows that another is acting as his

agent and fails to repudiate his acts, or accept the benefits

of them, will be estopped to deny the agency as against

such other.

1.) Estoppel of Agent

b.) As to sub-agentTo estop the principal from denying hisliability to a 3rd person, he must have known or be charged

with knowledge of the fact of the transmission and the

terms of the agreement between the agent and sub-agent.


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c.) As to 3rdpersons One who knows that another is actingas his agent or permitted another to appear as his agent,

to the injury of 3rd persons who have dealt with theapparent agent as such in good faith and in the exercise

of reasonable prudence, is estopped to deny the agency.

A 3rd person, having dealt with one as an agent may be estopped

to deny the agency as against the principal, agent or 3rd personsin interest.

3.) Estoppel of 3rdPersons

A 3rd person, having dealt with one as an agent may beestopped to deny the agency as against the principal,

agent or 3rd persons in interest.


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4.) Estoppel of the governmentThe government isneither estopped by the mistake or error on the part of its

agents. But it may be estopped through affirmative acts ofits officers acting within the scope of their authority.

Distinction between Implied agency and Agency by

estoppelImplied Agency Agency by Estoppel

There is actual agency.

Hence, he has rights and

duties as agent

There is no actual agency. Hence, he

has no rights and duties as an agent

The principal is liable alone,

not the agent

The one who caused (either the

principal or agent) is the one

responsible. In both cases, the third

person must have acted in good faith.


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Art. 1874. When a sale of a piece of land or any interesttherein is through an agent, the authority of the latter

shall be in writing; otherwise, the sale shall be void.

Sale, How effected:

1. Through the owner himself: if not made in writing thecontract of sale is unenforceable not void. It is however

subject to ratification.

2. Through an agent of the owner:if not in writing thecontract of sale is not unenforceable but void. It is not

therefore subject to ratification.The authority of theagent to sell must be in writing, otherwise the sale is

void.


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A letter is sufficient authorization to an agent [Jimenezv. Rabot].

Is Repurchase Included Within the Contemplation of Law?

The law speaks of Sale. Repurchase, however, through an agent,

partakes of the nature of sale, which when effected through an

agent, the agency should be in writing to be valid (Fernandez v.

Rabot, 4 CAR 221)

Art. 1875. Agency is presumed to be for a compensation, unlessthere is proof to the contrary.

The presumption is rebuttable.

Gratuitous Agency: when the service rendered is undertaken to begratuitous, the law does not raise an implied promise to pay therefor,

though the service be valuable (Robinson v. Lincoln Trust, 95 NJL 445)


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When is an Agent Entitled to Compensation?

In the absence of a specific agreement, an agent is entitled to

compensation only after he has completely or substantiallycompleted his obligation as an agent.

Broker: One who in behalf of others, and for compensation or fee,negotiate contracts relative to property. He is the negotiator between

the parties, never acting in his own name, but in the name of those who

employ him. He is strictly a middleman and for some purposes, the

agent of both parties.


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When is a broker entitled to compensation?

A broker is entitled to commission whenever he rings to his principala party who is able and willing to take the property, and enter into a

valid contract upon the terms named by the principal, although the

particulars may be arranged and the matter negotiated and

completed between the principal and the purchaser directly.

A broker is never entitled to commission for unsuccessful efforts. It

is only after the transaction has been concluded that the broker

acquires vested interest in or right to his commission.

Furthermore, the transaction need not only be perfected but also

consummated to justify brokers oragents commission.


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Measure of Compensation

Compensation depends upon the specific stipulation of the parties.

In the absence of such, compensation shall be based on quantum

meruit basis.

Efficient Procuring Cause

The broker must be the efficient agent. The means employed by him

must result in the sale. He must find the purchaser and the sale

must proceed from his efforts acting as a broker.

Does the law allow double agency?

Double Agency: when the agent is acting simultaneously forboth the seller and the buyer.

Such agency is disapproved by law for being against public policy

and sound morality.


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The exception is where the agent acted with full knowledge andfree consent of the principals.

In case the agent assumes a double agency, what ishis right to compensation?

1.) If with knowledge of both principals recovery can be had fromboth.

2.) If without knowledge of both agent can recover from neither.

3.) If with knowledge of only one as to the principal who knew ofthat fact and as to the agent, they are in pari delicto and the courts

shall leave them as they were, the contract between them being

void as against public policy and good morals.


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Art. 1876. An agency is either general or special. Theformer comprises all the business of the principal.

The latter, one or more specific transactions.

Classification of Agents:

1.) Universal agent: One employed to do all acts that the principalmay personally do, and which the principal can lawfully delegate to

another the power of doing.

2.) General agent: One employed to transact all the business of

his principal, or all business of a particular kind or in a particularplace, or in other words, to do all acts connected with a

particular trade, business, or employment.


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3.) Special/Particular agent: One authorized to act in one or morespecific transactions, or to do one or more specific acts, or to act upon

a particular occasion. e.g.:

a.) Attorney at law: One whose business is to representclients in legal proceedings.

b.) Auctioneer: One whose business is to sell property forothers to the highest bidder at a public sale.

c.) Broker: One whose business is to act as intermediarybetween 2 other parties.

d.) Factor: One whose business is to receive and sell goods

for a commission, being entrusted with the possession ofthe goods involved in the transaction.

f. Attorney-in-fact: One who is given authority by his principal

to do a particular act not of a legal character.

General Agent v. Special Agent


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General Agent v. Special Agent

As to General agent Special agent

Scope of

authority

All acts connected w/

the business in which

he is engaged.

Only one or more specific

acts in pursuance of particular

instructions or w/ restrictionsnecessarily implied from the

act to be done.

Nature of

serviceauthorized

Series a transactions

involving a continuity ofservice.

Single transaction or a series

of transactions not involvingcontinuity of service.

Extent to whichagent may bind

principal

By an act within the

scope of his authority

although it may be

contrary to his specialinstructions

Cannot in a manner beyond

or outside the specific acts

w/c he is authorized to

perform

Termination ofauthority

Apparent authority does

not terminate by mere

revocation of authority

w/o notice to 3rd

parties.

Termination effective as to 3rd

party unless agency was for

purpose of contracting w/ that

3rd

party.


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Construction of Merely Strictly construed.

instructions ofprincipal

advisory. Limits the authority of agent.

Art. 1877. An agency couched in general terms comprises onlyacts of administration, even if the principal should state that hewithholds no power or that the agent may execute such acts as

he may consider appropriate, or even though the agency shouldauthorize a general or unlimited management.

Agency couched in general terms covers only acts of

administration.

A general power permits an agent to do all acts for which the law

does not require a special power (Dominion Insurance Corp v.

CA, 376 SCRA 244).


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Examples of acts of mere administration:

1.) To sue for collection of debts;

2.) To employ workers or servants and employees needed for theconduct of business;

3.) To engage counsel to preserve the ownership and

possession of the principals property;

4.) To lease real property to another person for 1 year or less,

provided the lease is not registered;

5.) To make customary gifts for charity or to employees in the

business managed by the agent

6.) To borrow money if it be urgent and indispensable for the

preservation of the things under administration.


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Exception: power of managing partner, he may perform actsaffecting the ownership if the same are necessary to promote or

accomplish a declared object of the partnership.

How are contracts of agency construed?

Contracts of agency as well as general powers of attorney must be

interpreted in accordance with the language used by the parties.

The real intention of the parties is primarily determined from thelanguage used and gathered from the whole instrument.

In case of doubt, resort must be had to the situation, surroundings

and relations of the parties. The intention of the parties must be

sustained rather than defeated. So if the contract be open to 2

constructions, one of which would uphold the intention while the

other would overthrow it, the former is to be chosen.

Art 1878 Special powers of attorney are necessary in


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Art. 1878. Special powers of attorney are necessary inthe following cases:

1.) To make such payments as are not usually considered as

acts of administration;

2.) To effect novations which put an end to obligationsalready in existence at the time the agency wasconstituted;

3.) To compromise, to submit questions to arbitration, torenounce the right to appeal from a judgment, to waiveobjections to the venue of an action or to abandon aprescription already acquired;

4.) To waive any obligation gratuitously;

5.) To enter into any contract by which the ownership of animmovable is transmitted or acquired either gratuitously or fora valuable consideration;

6 ) T k ift t t f h it


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6.) To make gifts, except customary ones for charity orthose made to employees in the business managed by theagent;

7.) To loan or borrow money, unless the latter act be urgentand indispensable for the preservation of the things whichare under administration;

8.) To lease any real property to another person for more thanone year;

9.) To bind the principal to render some service withoutcompensation;

10.) To bind the principal in a contract of partnership;

11.) To obligate the principal as a guarantor or surety;

12.) To create or convey real rights over immovable property;

13 ) T t di t i h it


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13.) To accept or repudiate an inheritance;

14.) To ratify or recognize obligations contracted beforethe agency;

15.) Any other act of strict dominion.

Special Power of Attorney

It is an authority granted by the principal to the agent wherethe act for which it is drawn is expressly mentioned.

General Power of Attorney

It is an authority granted to the agent to do all acts of aparticular character. Special power can be included in a

general power, either by giving authority for all acts of a

particular character or by specifying therein the act or

transaction for which a special power is needed.

S f G l A th it t P h


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Scope of General Authority to Purchase

Where an agents power to purchase is general and unrestricted, he has

implied authority to do whatever is usual and necessary in the exercise of

such power. He may:

1.) Determine the usual and necessary details of

the contract,

2.) agree upon the price,

3.) modify or rescind the contract of purchase,

4.) accept delivery for his principal,

5.) give directions for the delivery of the propertypurchased, and

6.) may borrow money to pay for the care and

preservation of the property purchased.


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But he has nospecial power to

1.) Settle a contest between the principal and a 3rd person

regarding the ownership of goods purchased, or

2.) Agree to an account stated, or

3.) Do anything not usual or necessary to the exercise of

such authority.

Scope of Special Authority to PurchaseWhere the agency is a special one, or is restricted to purchases

upon certain terms and conditions, the agent has noauthority to

1.) Purchase upon different terms and conditions fromthose authorized, or

2.) Modify or rescind a contract of purchase made by the

principal.


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Art. 1879. A special power to sell excludes the power tomortgage; and a special power to mortgage does not include thepower to sell.

The power to sell is different from the power to mortgage in same way

that the latter is different from the power to contract loans.

The following are included in a Power to Sell:

The power to:

1.) Find a purchaser or to sell directly;

2.) Deliver the property;

3.) Make the usual representation and warranty;

4.) Execute the necessary transfer documents;


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5.) Fix the terms of the sale unless there be set

conditions stipulated by the principal;

6.) Sell only for cash;

7.) Receive the price unless he was

authorized only to solicit orders.

The following are notincluded in a Power to Mortgage

The power to:

1.) Sell;

2.) Execute a 2nd mortgage;

3.) Mortgage for the agents personal benefit or for the

benefit of any 3rd person, unless the contrary has been

clearly indicated.


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Does the principal have the power to revoke a contractgiving an agent exclusive authority to sell?

YES. But he may not have the right to use such power if he

has agreed not to exercise such power during a certain

period.

In case he fails to comply with this obligation-not-to-do, he

will be liable for damages.

Art. 1880. A special power to compromise does notauthorize submission to arbitration.


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Rationale:

A principal may authorize his agent to compromise because of

absolute confidence in the latters judgment and discretion toprotect the formers rights and obtain for him the best bargain

in the transaction. If the transaction would be left in the hands

of an arbitrator, said arbitrator may not enjoy the trust of the

principal.

What happens if the agent is specifically authorized tosubmit to arbitration?

Then the arbitration award binds the principal, provided, of course,

that the agent acted within the scope of his authority.


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Art. 1881. The agent must act within the scope of hisauthority. He may do such acts as may be conducive

to the accomplishment of the purpose of the agency.

Authority: The power of the agent to affect the legal relations of theprincipal by acts done in accordance with the principals manifestation

of consent to him.

It is the power of the agent to act within the scope of his assignment

on behalf of his principal with binding effect on the latter.

The authority of the agent is the very essence sine qua non ofthe principal and agent relationship. This authority, unless it is

otherwise agreed, includes only the authority to act for the benefit of

the principal, and the source of the authority is the principal and

never the agent.

Ki d f A h i


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Kinds of Authority:

1.) Actual: when it is actually granted, and it may be express orimplied. It results from what the principal indicates to the agent.

2.) Express: when it is directly conferred by words.

3.) Implied: when it is incidental to the transaction or

reasonably necessary to accomplish the purpose of theagency, and therefore, the principal is deemed to have actually

intended the agent to possess.

4.) Apparent or Ostensible: when it is conferred by words,conduct or even by the silence of the principal which causes a 3rd

person reasonably to believe that a particular person, who may

or may not be the principals agent, has actual authority to act for

the principal. Ostensible authority is another name forauthorityby estoppel.

5 ) G l h it f t ll th b i f th


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5.) General: when it refers to all the business of theprincipal.

6.) Special: when it is limited only to one or more specific

transactions.

7.) By necessity or by operation of law: when it is demandedby virtue of the existence of an emergency; it terminates when

the emergency has passed.

Requisites of Agency by necessity:

a.) An emergency actually exist

b.) Agent cannot timely communicate with the principal

c.) Exercise of additional authority is forprincipals own

protection

d.) Adoption of reasonable means to cope with the

situation

e.) Stoppage of authority from the moment the

emergency ceases


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Requisites for Principal to be Bound by Act ofAgent:

1.) The agent must act in behalf of the principal;

2.) The agent must act within the scope of his

authority.

When is a principal notbound by the act of his agent?

When the agent acts without or beyond the scope of his authority; or

when the agent acts within the scope of his authority but in his own

name except when the transaction involves things belonging to the

principal.

Technical difference between Authority andPower

Authority is the cause, while power is the effect. The former springs

from the principal and is delegated to the agent and by reason thereof,

th t i d t f th t th i d t b


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the agent is empowered to perform the act authorized to be

done.

Authority? Whose behalf? Status of

Transaction

With authority Principals Valid

With authority Own Depends. [1883 ]

Without Principals Unenforceable

Without Own Valid

Who to sue?In case the agent acts in the name of the principal and within his

scope of authority, you must name the principalas the defendant.


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Note: The authority to look for buyers does not carry with it theauthority to sell.

Special prohibited acts in Agency

1.) The agent is prohibited from buying, even at a public or judicialauction, property entrusted to him by the principal for sale or

administration, without the consent of the principal.

2.) The agent cannot be a lessee of said property

3.) By analogy, he cannot also be a mortgagee of the

principals property.


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Art. 1882. The limits of the agents authority shall not beconsidered exceeded should it have been performed in amanner more advantageous to the principal than that specifiedby him.

What happens if the agent exceeds his authority but heperforms the agency in a manner more advantageous to theprincipal?

It will be as if he did not exceed the limits of his authority since he

must do such acts as may be conducive to the accomplishment of

the purpose of the agency.

Article 1882 presupposes sufficient authority to fulfilthe agency.

Test: Would the principal enter into this transaction?


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Example: the agent is authorized to sell cell phones by

instalment, but he was able to sell it in cash.

Art. 1883. If an agent acts in his own name, the principalhas no right of action against the persons with whomthe agent contracted; neither have such persons against

the principal.

In such case the agent is the one directly bound in favor of theperson with whom he has contracted, as if the transaction were

his own, except when the contract involves things belonging tothe principal.


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The provisions of this article shall be understood to bewithout prejudice to the actions between the principaland agent.

Kinds of Principals:

1.) Disclosed: if at the time of the transaction contracted by the

agent, the other party thereto has known that the agent is acting fora principal and has known the principals identity.

2.) Partially disclosed: if the other party knows or has reason toknow that the agent is or may be acting for a principal but is

unaware of the principals identity. The partially disclosed principalmay enforce against the 3rd person the contract of the agent like any

disclosed principal. Similarly, the 3rd person has a right of action

against the principal.


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3.) Undisclosed: if the party has no notice of the fact that theagent is acting as such for a principal.

General Rule in 1883: If the agent is authorized to act on behalf ofthe principal but instead acts in his own name, the agent is the one

directly liable to the person with whom he had contracted as if the

transaction were his own.

Reason why the agent is personally liable:

1.) He did not act within the scope of his authority

2.) He act in his own name not in the name or representation

of the principal


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Exception: If the contract involves something belonging to theprincipal. This exception applies only when the agent has in fact

been authorized by the principal.

Remedy of the Principal if this situation arises:He can demand from the agent damages for his failure to

comply with the agency.

May the agent who is directly bound sue on hisown name?

When the agent transact business in his own name for the benefit

of an undisclosed principal, he may sue or be sued, in hisindividual capacity there being no action for or against the

undisclosed principal.


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When the principal is disclosed, action must be filedby or against him

An action on behalf and for the benefit of the principal cannot be

brought in the name of the agent or attorney-in-fact. It must

brought in the name of the real party in interest.

Remedy of the 3rd person with whom the agentcontracted in case the obligation is not complied with:

If the case falls under the general rule, he can sue the agent.

But when the contract involves things belonging to theprincipal, he can sue the principal. But if it cannot be

determined w/o litigation who is liable, he can sue both.


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Remedy of 3rd person in case authority of the agent isdoubtful

The agent should be included in the case as party defendant.

This is a suit against alternative defendants.

Effects when an agent becomes the assignee

The agent may in his own behalf bring an action founded

on a contract made for his principal, as an assignee of

such contract.

Prepared by:

Lizglen L. GliponeoG

Nature, Form and Kinds of Agency

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Transcript of Nature, Form and Kinds of Agency