(1) Defective Definition of the Contract of Agency

The definition of AGENCY given in Art. 1868 is very broad, and therefore, defective.
(a) As worded, the definition includes the relationship of master and servant, of employer and
employee, of lessor and independent contractor. The servant, the employee, and the independent
contractor all render some work or service in representation or on behalf of another.

(NOTE: What the agent really does for the principal is a JURIDICAL ACT, and not merely a
material one. In other words, while an agent may exercise discretionary powers, the lessee
of services ordinarily performs only ministerial functions.)

(b) As worded, it would seem that the agent must always expressly represent the principal. This is
not necessarily so, for sometimes an agent does not disclose his principal; he may even act in
behalf of himself, but here the principal would still be BOUND “when the contract involves things
BELONGING to the principal.” (Art. 1883, 2nd par., Civil Code).

Other Definitions

“An agency may be defined as a contract either express or implied upon a consideration, or a
gratuitous undertaking, by which one of the parties confides to the other, the management of some
business to be transacted in his name or on his account, and by which that other assumes to do
the business and renders an account of it.” (2 Am. Jur. 13).
(b) “Agency is the relationship which results from the manifestation of consent by one person to
another that the other shall act on his behalf and subject to his control, and consented by the
other so to act.” (Restatement of
the Law of Agency, Sec. 1).
(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, 12 th Ed., 302-303).

Roman Law

In Roman Law, there was the contract of mandatum where one person called mandans authorized
another called the mandatarius to do something for him. This originated
from the obligation or right of a son or a slave to represent the pater familias. (Holland,
Jurisprudence, pp. 302-303).

(NOTE: In Spanish, the principal is called mandante, while the agent is referred
to as the mandatario. The contract itself is a mandato.)

Importance of Agency
It enables a man to increase the range of his individual and corporate activity by enabling him to
be constructively present in many places and to carry on diverse activities at the same time.
(Mechem, Outlines of Agency, 3rd ed., p. 5).

History

Formerly, there was a difference between a commercial agency or commission on the one hand, and
a civil agency on the other. A commercial agency was entered into for commercial purposes; the
civil agency, for other objectives. Today, however, there is no more commercial agency or
commission in view of the repeal by the new Civil Code of the Code of Commerce provisions
thereon. (Art. 2270). Therefore, today, whether the agency be for a civil or a commercial purpose, it
is now called a civil agency, and is governed by the Civil Code.
Characteristics
(a) Agency is a principal, nominate, bilateral, preparatory, commutative, and generally onerous
contract.
(b) Generally, it is also a representative relation, not a status since agency is not inherent or
permanent.
(c) It is a fiduciary relation since it is based on trust and confidence. (See Severino v.
Severino, 44 Phil. 343).

Parties to the Contract

The two parties to the contract are the principal and the agent.

Definitions:
(a) Principal — he whom the agent represents and from whom he derives authority; he is the one
primarily concerned in the contract. (Sec. 3, 2 C.J. 420).

(b) Agent — he who acts or stands for another. Usually, he is given full or partial discretion, but
sometimes he acts under a specific command. (Bishop on Contracts,Sec.
1027).
(NOTE: He, therefore, acts in another’s name. If he acts under another name, that is, if he
pretends to be someone else, he is not an agent, for here he certainly acts in his own name.)
(NOTE: An agent may have his own agent, who is thus referred to as sub-agent.)

Capacity of the Principal

(a) In general, if he is capacitated to act for himself, he can act thru an agent. He must, therefore,
be capacitated to give consent. (2 C.J. 429-430). If any special capacity is needed, it is he who must
possess it and not the agent, for the latter merely acts in his behalf.

(b) The principal may be natural or a juridical person. (As a matter of fact, a private corporation
and a partnership can only act thru agents.) (Mechem, p. 33).
(NOTE: A social club or any other organization cannot act as a principal if it has no juridical
personality. Individual members thereof can be bound only if an express or implied agency has
been consented to by each of them.)

(c) Generally, an emancipated minor can be a principal. So may a married woman. As a matter of
fact, the husband may appoint her as agent or administrator of his capital
or of the conjugal partnership. Similarly, a married woman may appoint her husband as an agent
of her paraphernal property.

(d) A husband, as administrator of the conjugal partnership (Art. 165, Civil Code) is in that sense
an agent who can bind conjugal property, subject to legal restrictions, such as those imposed by
Art. 166, Civil Code. Thus, a conveyance of conjugal real property without the needed consent of
the wife is VOIDABLE, and the wife is given ten years within which to bring an action for
annulment. (Rodolfo Lanuza v. Martin de Leon, L-22331, Jun. 6, 1967). Ratification may of course
be made by the wife. (Ibid.)

Capacity of an Agent
His capacity is in general the same as in the law of contracts, that is, he must be able to bind
himself, but only insofar as his obligations to his principal are concerned. Insofar as third persons
are concerned, however, it is enough that his principal be the one capacitated, for generally an
agent assumes no personal liability. Usually, therefore, the contract with a stranger is valid, even if
the agent be a minor so long as his principal was capacitated. However, as between them (principal
and agent), the minor-agent can set up his incapacity, provided he is not in estoppel.