CHAPTER 4: MODES OF EXTINGUISHMENT OF Other causes are change in law affecting the

AGENCY subject matter or transaction involved in the

execution of the agency, especially if it makes the
Article 1919. Agency is extinguished:
required act illegal and change in conditions not
1. By its revocation; anticipated by the parties like the outbreak of war,
2. By the withdrawal of the agent; preventing or making impossible the
3. By the death, civil interdiction, insanity or accomplishment of the purpose of the agency.
insolvency of the principal or of the agent;
Article 1920. The principal may revoke the agency
4. By the dissolution of the firm or
at will, and compel the agent to return the
corporation which entrusted or accepted
document evidencing the agency. Such revocation
the agency;
may be express or implied.
5. By the accomplishment of the object or
purpose of the agency; Except: Bilateral Contract
6. By the expiration of the period for which
AGENCY GENERALLY REVOCABLE AT WILL BY
the agency was constituted.
PRINCIPAL
MODES OF EXTINGUISHING AN AGENCY
An agency may be terminated by the subsequent
An agency does not last forever. Like most acts of the parties. When done by the principal, it
consensual agreements, the relationship usually is called "revocation" and when done by the agent,
comes to an end at some point. it is usually spoken of as "renunciation."
Termination can take place because of something Subject only to the exceptions provided in Article
done by the parties themselves or of something 1927, the principal may revoke the agency at will.
beyond their control by operation of law. Under Since the authority of the agent emanates from the
the law, agency may be terminated: principal, it is enough that the principal should wish
to terminate the agency.
1. By agreement; or
2. By the subsequent acts of the parties which  Moreover, confidence being the cardinal
may be either. basis of the relation, it stands to reason that
a. by the act of both parties or by it should cease when such confidence
mutual consent; or disappears.
b. by the unilateral act of one of them;  As the law makes no distinction, revocation
or at will is proper whether the agency is
3. by operation of law. gratuitous or with compensation.
CONTINUANCE AND CAPACITY OF PRINCIPAL AND REVOCATION BY PRINCIPAL
AGENT
GENERAL RULE: The principal may:
Agency requires the existence and capacity of both
1. Revoke the agency at will; and
the principal and agent. The death, civil
2. Compel the agent to return the document
interdiction, insanity or insolvency of either party
evidencing the agency.
terminates the agency.
LIABILITY OF PRINCIPAL FOR DAMAGE CAUSED BY
Civil interdiction is a form of disqualification which
REVOCATION.
deprives the offender during the period of his
sentence of the right to manage his property and While the principal may have absolute power to
dispose of such property by any act or any revoke the agency at any time, he must respond in
conveyance inter vivos. damages in those cases wherein not having the
right to do so, he should discharge the agent.
Dissolution of a firm or corporation extinguishes its
juridical existence. It is equivalent to its death or His power to revoke must be distinguished from his
sometimes a death of a natural person. right to revoke. Thus, the principal is liable in
damages occasioned by the wrongful discharge of
MODES PROVIDED NOT EXCLUSIVE
the agent before the expiration of the period fixed.
An agency may also be extinguished by the modes
of extinguishment of obligations in general, when
applicable, like loss of the thing and novation.
KINDS OF REVOCATION person until notice thereof is given them.
Since the third persons have been made to
Revocation may be express or implied. An example
believe by the principal that the agent is
of implied revocation is when the principal
authorized to deal with them, they have a
appoints a new agent for the same business or
right to presume the representation
transaction or when the principal directly manages
continues to exist in the absence of
the business entrusted to the agent.
notification by the principal. Of course,
If the authority of the agent is in writing, the notice is not required if the third persons
principal can compel the agent to return the already know of the revocation.
document evidencing the agency. 2. Agency to contract with general public. In
case the agent has general powers,
The purpose is to prevent the agent from making
innocent third persons dealing with the
use of the power of attorney and thus avoid liability
agent will not be prejudiced by the
to third persons who may subsequently deal with
revocation before they had knowledge
the agent on the faith of the instrument.
thereof. However, the fact that the
RENUNCIATION OF AGENCY BY AGENT revocation was advertised in a newspaper
of general circulation would be sufficient
1. Agency terminable at will. In effect, the
warning to third persons for the publication
agent resigns. Thus, if there is no contract
constitutes notice upon everybody and this
existing between the parties or if the
is true whether or not such third persons
contract is for no fixed or definite period of
have read concerned.
time, it is terminable by the agent at will.
Even in the face of an express contract, the Under Article 1921, the notice of revocation must
agent has the power to renounce the be personal; under Article 1922, it may be
agency, since an agency relationship is personal.
voluntary, although under such
Article 1923. The appointment of a new agent for
circumstances, his breach of contract may
the same business or transaction revokes the
create a liability for wrongful termination.
previous agency from the day on which notice
 Form of renunciation. It may be implied, as
thereof was given to the former agency, without
for example, where he has conducted
prejudice to the provisions of the two preceding
himself in a manner clearly incompatible
articles.
with his duties as agent as when an agent
abandons the object of his agency and acts REVOCATION BY APPOINTMENT OF NEW AGENT
for himself in committing a fraud upon his
There is implied revocation of the previous agency
principal, his capacity as agent ceases, or
when the principal appoints a new agent for the
when he files complaint against the
same business or transaction provided there is
principal in connection with the agency.
incompatibility.
Article 1921. If the agency has been entrusted for
1. The revocation does not become effective
the purpose of contracting with specified persons,
as between the principal and the agent until
its revocation shall not prejudice the latter if they
it is in same way communicated to the
were not given notice thereof.
latter.
Article 1922. If the agent had general powers, 2. The rights of third persons who acted in
revocation of the agency does not prejudice third good faith and without knowledge of the
persons who acted in good faith and without revocation will not be prejudiced thereby.
knowledge of the revocation. Notice of the
Article 1924. The agency is revoked if the principal
revocation in a newspaper of general circulation is
directly manages the business entrusted to the
a sufficient warning to third persons.
agent, dealing directly with third persons.
EFFECT OF REVOCATION IN RELATION TO THIRD
REVOCATION BY DIRECT MANAGEMENT OF
PERSONS
BUSINESS BY PRINCIPAL HIMSELF
1. Agency to contract with specific persons. If
The above article provides for another case of
the agency is created for the purpose of
implied revocation.
contracting with specific persons, its
revocation will not prejudice such third
 1. Unless the only desire of the principal is for contracted, or if a partner is appointed manager
him and the agent to manage the business of a partnership in the contract of partnership and
together, the effect of the direct his removal from the management is unjustifiable.
management of the business by the
WHEN AGENCY IRREVOCABLE
principal himself is to revoke the agency for
there would no longer be any basis for the General rule: is that the principal may revoke an
representation previously conferred. agency at will.
2. If the purpose of the principal in dealing
Reason for the rule: is that the essence of agency is
directly with the purchaser and himself
the agent's duty of obedience to the principal.
effecting the sale, for example, is to avoid
payment of his agent's commission, the This rule, however, has exceptions and they are:
implied revocation is deemed made in bad
a. When the agency is created not only for the
faith and cannot be sanctioned without,
interest of the principal but also for the
according to the agent, the commission
interest of third persons; and
which is due him.
b. When the agency is created for the mutual
Note: Article 1924 should be distinguished from interest of both
Article 1916 which governs the relations as c. the principal and the agent.
between themselves of third persons who
In these cases, it is evident that the agency cannot
separately contract with the agent and the
be revoked by the sole will of the principal.
principal with regard to the same thing.
Article 1927 mentions three (3) instances of
Article 1925. When two or more principals have
irrevocability.
granted a power of attorney for a common
transaction, any one of them may revoke the EXAMPLES:
same without the consent of the others.
(1) P sold to B a factory for P1,000,000.00. B
REVOCATION BY ONE OF TWO OR MORE paid only P800,000.00. It was stipulated
PRINCIPALS that the ownership in the factory would be
transferred to B only after the payment of
The appointment of an agent by two (2) or more
the balance of P200,000.00 to be made
principals for a common transaction or undertaking
within six (6) months. It was further agreed
makes them solidarily liable to the agent for all the
would be used to pay off the balance of the
consequences of the agency. Consequently, one of
purchase price.
the principals is granted under this article the right
to revoke the power of attorney without the
consent of the others. Here, P cannot revoke the agency at will for a
bilateral contract depends upon it.
In a solidary obligation, the act of one is considered
by law as the act of all.
(2) P borrowed from B P50,000.00. As security
Article 1926- A general power of attorney is
for the debt, p gives A power of attorney to
revoked by a special one granted to another
collect rents due from tenants of P and
agent, as regards the special matter involved in
authorizes A to apply the same to the debt
the latter.
of P50,000.00.
PARTIAL REVOCATION OF GENERAL POWER
In this article, two (2) agents are involved: one to In this case, P cannot revoke the agency, without
whom a general power is previously granted and any justifiable cause, for it is a means of fulfilling
the other, to whom a special power is subsequently his obligation to B.
conferred.
A specific power naturally prevails over a general (3) A, B, and C are partners in business by
power. common agreement. A was appointed a
manager in the articles of partnership
Article 1927. An agency cannot be revoked if a
(written document embodying the contract
bilateral contract depends upon it, or if it is the
of partnership).
means of fulfilling an obligation already
The appointment of A is revocable only upon just forbidden to prefer his interests to those of
and lawful cause and upon the vote of the partners the principal, he is not required to sacrifice
representing the controlling interest. (Art. 1800.) his own interest just to serve the principal.
The reason is that the appointment is, in effect, Article 1929. The agent, even if he should
one of the conditions of the contract and it is only withdraw from the agency for a valid reason, must
logical that such appointment should not be continue to act until the principal has had
revoked without the consent of all the partners reasonable opportunity to take the necessary
including A. steps to meet the situation.
AGENCY COUPLED WITH AN INTEREST OBLIGATION OF AGENT TO CONTINUE TO ACT
AFTER WITHDRAWAL
An agency coupled with an interest cannot be
terminated by the sole will of the principal Even when the agent withdraws from the agency
although it is so revocable after the interest ceases. for a valid reason he must continue to act until the
principal has had reasonable opportunity to take
In order that, an agency may be irrevocable
the necessary steps (like the appointment of a new
because it is coupled with an interest, it is essential
agent) to remedy the situation caused by the
that the interest of the agent shall be in the subject
withdrawal.
matter of the power conferred and not merely an
interest in the exercise of the power because it The purpose of the law is to prevent damage to
entitles him to compensation therefor. the principal.
Article 1928. The agent may withdraw from the Article 1930. The agency shall remain in full force
agency by giving due notice to the principal. If the and effect even after the death of the principal, if
latter should suffer any damage by reason of the it has been constituted in the common interest of
withdrawal, the agent must indemnify him the latter and of the agent, or in the interest of a
therefor, unless the agent should base his third person who has accepted the stipulation in
withdrawal upon the impossibility of continuing his favor.
the performance of the agency without grave
WHEN DEATH OF PRINCIPAL DOES NOT
detriment to himself.
TERMINATE AGENCY
RIGHT OF AGENT TO WITHDRAW
Agency is terminated by the death of the principal.
Just as the principal may revoke generally the The reason is obvious. Agency, being based on
agency at will (Art. 1920.), the agent may likewise representation, there is no one to be represented
withdraw from the agency at any time. This rule where the principal is already dead.
which applies whether the agency is gratuitous or
However, there are exceptions to this rule. In the
for compensation is based on the constitutional
following cases, the agency remains in full force
prohibition against involuntary servitude.
and effect even after the death of the principal:
1. Without just cause. The law imposes upon
1. If the agency has been constituted in the
the agent the duty to give due notice to the
common interest, of the principal and the;
principal and if the withdrawal is without
and
just cause, to indemnify the principal should
2. If it has been constituted in the interest of a
the latter suffer damage by reason of such
third person who has accepted the
withdrawal. The reason for the indemnity
stipulation in his favor.
imposed by law is that the agent fails in his
obligation and as such, he must answer for Article 1931. Anything done by the agent, without
losses and damages occasioned by the non- knowledge of the death of the extinguishes the
fulfillment. agency, is valid and shall be fully effective with
2. With just cause. If the agent withdraws respect to third persons who may have contracted
from the agency for a valid reason (Art. with him in good faith.
1929.) as when the withdrawal is based on
VALIDITY OF ACTS OF AGENT AFTER DEATH OF
the impossibility of continuing with the
PRINCIPAL
agency without grave detriment to himself,
or is due to a fortuitous event, the agent The death of the principal extinguishes the agency
cannot be held liable. While the agent is but in the same way that revocation of the agency
does not prejudice third persons who have dealt
with the agent in good faith without notice of the
revocation (Arts. 1921, 1922.), such third persons
are protected where the agent acted without
knowledge of the death of the principal or of any
other cause which extinguishes the agency.
Note:
Under Article 1931 the law requires not only the
third persons to be in good faith but also the agent.
However, the agent is required to "finish the
business already begun on the death of the
principal, should delay entail any danger."
Article 1932. If the agent dies, his heirs must
notify the principal thereof, and in the meantime
adopt such measures as the circumstances may
demand in the interest of the latter.
DUTY OF AGENT'S HEIRS TO PROTECT INTEREST
OF PRINCIPAL
If the agent dies, the agency is also extinguished.
In such case, the law imposes upon the heirs of the
deceased agent not only the obligation to notify
the principal to enable the latter reasonable
opportunity to take such steps as may be necessary
to meet the situation (Art. 1929.) but also to adopt
such measures as the circumstances may demand
for the interest of the principal.
The heir's duty arises from what may be termed as
"agency by operation of law." Of course, the heirs
can continue the agency only temporarily for, as
we have seen, the essence of the contract of
agency is personal confidence.