Agency by Estoppel

Art. 1911. The principal is solidarily liable with the agent even when the latter has exceeded his authority, if the principal allowed him to act as though he had full powers. 

What is an agency by estoppel?

When a person, who is not really an agent, represents himself or is represented as such.

There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another. 

1.) Estoppel of Agent – One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the third 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.

b.) As to sub-agent – To estop the principal from denying his liability to a third 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.

c.) As to third persons – One who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency.

3.) Estoppel of tirrd Persons – A third person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or third persons in interest.

4.) Estoppel of the government – The government is neither estopped by the mistake or error on the part of its agents. But it may be estopped through affirmative acts of its officers acting within the scope of their authority.

Jurisprudence:

Requisites for an agency by estoppel to exist

Article 1911, on the other hand, is based on the principle of estoppel, which is necessary for the protection of third persons. It states that the principal is solidarily liable with the agent even when the latter has exceeded his authority, if the principal allowed him to act as though he had full powers. However, for an agency by estoppel to exist, the following must be established:

1.  The principal manifested a representation of the agents authority or knowingly allowed the agent to assume such authority;

2.   The third person, in good faith, relied upon such representation; and

3.  Relying upon such representation, such third person has changed his position to his detriment.

In Litonjua, Jr. v. Eternit Corp., this Court said that [a]n agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance. (Country Bankers Insurance Corporation vs Keppel Cebu Shipyard, G.R. No. 166044, June 18, 2012)

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Agency