When Agency is Required to be in Writing

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When required to be in writing – The contract of agency is required to be in writing or a written special of attorney must be executed for the following:

  • To makes such payments as are not usually considered as acts of administration;[1]
    • To effect novations which put an end to obligations already in existence at the time the agency was constituted;[2]
    • To compromise, to submit questions for arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;[3]
    • To waive any obligation gratuitously;[4]
    • To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;[5]
    • To make gifts, except customary ones for charity or those made to employees in the business managed by the agent;[6]
    • To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration;[7]
    • To lease any real property to another person for more than one year;[8]
    • To bind the principal to render some service without compensation;[9]
    • To bind the principal in a contract of partnership;[10]
    • To obligate the principal as a guarantor or surety;[11]
    • To create or convey real rights over immovable property;[12]
    • To accept or repudiate an inheritance;[13]
    • To ratify or recognize obligations contracted before the agency;[14] and
    • Any other act of strict dominion.[15]

Comic Lumber Corporation v. Court of Appeals
G.R. No. 114311, 29 November 1996

Petitioner Cosmic Lumber Corporation challenges the verdict of the trial court on the ground that the latter’s decision is void because the compromise agreement upon which it was based wass void.  Petitioner claimed that the said corporation’s Attorney-in-fact Villamil-Estrada “did not possess the authority to sell nor was she armed with a Board Resolution authorizing the sale of its property.” In fact, she was merely empowered “to enter into a compromise agreement in the recovery suit she was authorized to file against persons squatting on Lot No. 443, such authority being expressly confined to the ‘ejectment of third persons or squatters of… [lot No. 443] for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot.’”

HELD: The Compromise Agreement was void as the Attorney-in-fact exceeded her authority. She was not authorized to enter into compromise agreement. As the compromise agreement was void, the judgment based thereon was likewise void.

It was clear that the authority granted was “for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could take material possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this was protective of the rights and interests of petitioner in the property.”  There is nothing in her authorization granting any express or implied power to sell the subject property, even for a portion thereof. “Neither can a conferment of the power to sell be validly inferred from the specific authority ‘to enter into a compromise agreement’ because of the explicit limitation fixed by the grantor that the compromise entered into shall only be ‘so far as it shall protect the rights and interest of the corporation in the aforementioned lots.’”

It is a rule that the sale of a piece of land or any interest thereon through an agent requires that the latter’s authority to be in writing; otherwise, the sale is void. “Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language.  When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document.”

Best Legal Practices

  • Agent to obtain a notarized written authorization or power of attorney before carrying out the agency – The agent should obtain a notarized written power of attorney or authorization before carrying out the agency to avoid being personally liable.
  • Specify clearly in power of attorney the powers granted – The general or special power of attorney should clearly specify the powers granted by the principal to the agent.

[1] CIVIL CODE. Article 1878 (1).

[2] Ibid. Article 1878 (2).

[3] Ibid. Article 1878 (3).

[4] Ibid. Article 1878 (4).

[5] Ibid. Article 1878 (5). For instance, a sale of piece of land required a written special power of attorney. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void (Article 1874, Civil Code).

[6] Ibid. Article 1878 (6).

[7] Ibid. Article 1878 (7).

[8] Ibid. Article 1878 (8).

[9] Ibid. Article 1878 (9).

[10] Ibid. Article 1878 (10).

[11] Ibid. Article 1878 (11).

[12] Ibid. Article 1878 (12).

[13] Ibid. Article 1878 (13).

[14] Ibid. Article 1878 (14).

[15] Ibid. Article 1878 (15).

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