CIVIL LAW > VII. SPECIAL CONTRACTS > C. AGENCY > 1. NATURE, FORM, AND KINDS

The contract of agency in the Philippines is governed by Articles 1868 to 1932 of the Civil Code of the Philippines. Below is a comprehensive discussion of its nature, form, and kinds:

1. Nature of Agency

Definition

Article 1868: By the contract of agency, a person (the agent) binds himself to render some service or to do something in representation or on behalf of another (the principal), with the consent or authority of the latter.
Essential Characteristics:
- Principal-agent relationship: Based on trust and confidence (fiduciary relationship).
- Representation: The agent acts on behalf of the principal.
- Authority: The agent derives authority from the principal’s consent, express or implied.
- Service-oriented: Primarily established for a service or action to be performed.

General Principles

Consent: The principal must expressly or impliedly consent to the agent acting on their behalf.
Good faith: Both principal and agent are expected to act in good faith and for the benefit of one another.
Scope of authority: The agent must operate within the authority conferred by the principal, subject to applicable laws and the terms of the contract.

Nature of Obligation

Unilateral or bilateral: It can be unilateral if only the agent binds himself, or bilateral if both parties have obligations.
Principal-agent relationship: Can be gratuitous (without compensation) or onerous (with compensation).

2. Form of Agency

No Special Form Generally Required

General Rule (Article 1869): The contract of agency is valid and enforceable in whatever form it may be entered into, whether oral or written.
Exceptions: When the law requires a specific form:
- Sale of land or interest therein (Article 1874): The authority of the agent must be in writing.
- When the act to be performed requires a specific form: If the law prescribes a certain form for the act the agent is authorized to perform (e.g., a public instrument), the authority must also follow the same form.

Express vs. Implied Agency

Express Agency: Arises from a clear agreement between the principal and the agent, whether verbal or written.
Implied Agency: May arise from the conduct of the principal or from the circumstances indicating intent to create the agency.

3. Kinds of Agency

Based on Manner of Creation

Express Agency: Formed explicitly by agreement of the parties.
Implied Agency: Derived from actions or circumstances (e.g., a manager making decisions on behalf of a business).
Agency by Estoppel (Article 1911):
- Occurs when the principal’s acts create a reasonable belief in a third party that the agent has authority, even if such authority was not granted.
- The principal is estopped from denying the agent’s authority if a third party has relied on it in good faith.

Based on Authority

General Agency: Confers broad powers over a wide range of actions or transactions.
- Example: An agent empowered to manage a business.
Special Agency: Limited to specific acts or transactions.
- Example: An agent authorized to sell a specific property.

Based on Compensation

Gratuitous Agency: Agent acts without expectation of payment.
Onerous Agency: Agent is compensated for their service.

Based on Agent's Representation

Agent with Disclosed Principal: The third party knows the identity of the principal.
Agent with Undisclosed Principal: The agent acts without revealing the principal’s identity to the third party.
Agent Acting in Own Name (Article 1883): The agent acts in their own name but for the account of the principal.

Based on Relationship Between Principal and Agent

Agency Couched with Interest: The agent has an interest in the subject matter of the agency.
- Example: An agent who is also a creditor of the principal, tasked to sell property to settle debts.
Revocable Agency: Can be terminated by the principal at will.
Irrevocable Agency: Cannot be terminated unilaterally when:
- A bilateral contract depends on the agency.
- It is made for the agent’s benefit.

Supplementary Rules

Presumptions and Principles

Agency presumed when one acts on behalf of another (Article 1869): When a person acts in the name of another and the latter ratifies it.
Acts beyond authority (Article 1881): The principal is not bound unless they ratify such acts or the third party has knowledge of the limitation of the agent’s authority.

Duties of the Agent

Fidelity: Act in the best interest of the principal.
Diligence: Exercise ordinary diligence unless a higher degree is stipulated.
Accounting: Render accounts and return profits or benefits obtained from the agency (Article 1891).

Duties of the Principal

Reimbursement: Pay the agent for expenses incurred.
Compensation: Remit payment if the agency is onerous.
Indemnification: Compensate for damages due to non-performance of obligations or lack of authority (Article 1912).

This outline encompasses the essential aspects of the Nature, Form, and Kinds of Agency under Philippine law. Each provision highlights both general principles and specific legal stipulations, ensuring clarity and precision in understanding agency contracts.