Overview
This episode discusses the law on agency as found in the Civil Code, covering its nature, creation, key elements, distinctions from other contracts, and various types and forms of agency.
Definition and Purpose of Agency
- Agency is a contract where one person (agent) acts on behalf of another (principal) with the latter’s authority or consent.
- The principal uses an agent to extend their legal personality and conduct transactions where their presence is limited or impracticable.
- The underlying principle is representation; acts of the agent have the same legal effect as if done by the principal.
Distinction from Other Legal Relationships
- Agency is different from sale (transfer of ownership), employment (employee-employer relationship), and independent contractorship (absence of control and element of representation).
- Agency is a preparatory contract, while employment and independent contractorship are principal contracts.
- Claims from agency are governed by special rules under the Civil Code, while labor and contractorship claims follow the Labor Code and general civil law, respectively.
Fiduciary Nature and Imputed Knowledge
- The agent’s relationship with the principal is fiduciary, requiring utmost trust and confidence.
- The agent cannot claim ownership of property handled for the principal.
- Knowledge of the agent is generally imputed to the principal, except in cases of adverse interest, confidentiality, or collusion.
Essential Elements of Agency
- Consent of both principal and agent is required, either expressly or impliedly.
- Object: Execution of a juridical act regarding third persons.
- Cause: Can be gratuitous or for compensation, presumed to be for compensation by law.
- Agent must act in a representative capacity and within the scope of authority.
Capacity Requirements
- Both principal and agent must have legal capacity; incapacity can render the contract voidable or unenforceable.
- For third-party dealings, the principal’s capacity is crucial; the agent’s capacity is less relevant if acting within authority.
Forms and Creation of Agency
- Can be created expressly (oral or written) or impliedly through conduct, silence, or habitual engagement.
- Agency by estoppel arises when a principal’s representations cause third parties to believe in the agent’s authority.
- Apparent or ostensible agency binds principals to third parties when the principal’s actions lead to such belief.
Types and Kinds of Agency
- Express or implied, gratuitous (no compensation) or onerous (with compensation).
- General (all business of principal) or special (specific transactions).
- General agency (broad authority) differs from agency couched in general terms (limited to acts of administration).
- Agency may be ostensible (agent acts in principal’s name) or simple/commission (agent acts in own name for principal).
- Agency by necessity is not a means of creation but extends the agent’s authority in emergencies.
Key Distinctions and Doctrines
- Apparent authority is determined by the principal’s acts, not the agent’s claims.
- Agency by necessity grants emergency power, not a new agency.
- Implied and estoppel agencies differ regarding the existence of actual authority and liability.
Recommendations / Advice
- Always determine the existence and scope of agency based on explicit or implied consent, proper capacity, and clear representation.
- Distinguish agency from sale, employment, and independent contractorship to apply the correct legal principles.