Short answer. Yes. Article 1869 of the Civil Code recognizes that agency can be implied from the acts of the principal, from silence or lack of action, or from failure to repudiate — if the principal knows that another person is acting on their behalf without authority. Months of silence while your partner transacts on your account can bind you.
What the law says
Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.
Civil Code, Article 1869 — Express or Implied Agency. Read the full provision →
How implied agency is formed
Article 1869 says that agency can arise not just from a formal appointment but from conduct. Specifically, three patterns can create an implied agency: the principal's own acts (behavior that communicates authorization), silence or lack of action, and failure to repudiate the agency. The critical qualifier is that the principal must know that another person is acting on their behalf without authority. If you are unaware of the acting, silence cannot create the agency.
Why knowledge makes the difference
The reason knowledge is required is fairness to the third party. If your partner has been entering contracts on your behalf for months, and third parties dealt with him believing he had your authority, your silence while knowing this was happening creates a reasonable expectation that the authority existed. The third parties relied on that apparent authority. Allowing you to deny the agency after the fact — after the dealings are done — would unfairly shift the loss onto parties who had no reason to doubt the arrangement.
What you should have done — and can still do
If you discover that someone is acting on your behalf without authority and you do not want that relationship to continue, you must repudiate it promptly and clearly. Article 1869 says failure to repudiate, knowing of the unauthorized acts, can be enough to create the agency. Repudiation means notifying both the purported agent and, where possible, the third parties he has been dealing with. Delay in doing so — while transactions continue — risks confirming the implied agency further.
Oral agency and when a specific form is required
Article 1869 also notes that agency may be oral, unless the law requires a specific form. This means that even a verbal appointment can be valid in most situations. However, certain transactions — such as the sale of real property — require that the authority to act be in writing. If your partner has been performing transactions that required written authority and he had none, the contracts he entered for those specific acts may not be binding on you regardless of the implied-agency argument. This is worth examining with a lawyer if real property or other high-form transactions are involved.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Sps. Fernando and Lourdes Viloria vs. Continental Airlines, Inc, G.R. No. 188288, January 16, 2012 — read the decision on LawPhil →
- Yun Kwan Byung vs. Philippine Amusement Gaming Corporation, G.R. No. 163553, December 11, 2009 — read the decision on LawPhil →
- Professional Services, Inc. vs. Natividad & Enrique Agana, G.R. No. 126297, January 31, 2007 — read the decision on LawPhil →
- Samuel Parilla, et al. vs. Dr. Prospero Pilar, G.R. No. 167680, November 30, 2006 — read the decision on LawPhil →