Modes of Extinguishment of Agency

Art. 1919
Agency is extinguished by:
1.
2.
3.
4.
5.
6.

Revocation
Withdrawal of the agent
Death, civil interdiction, insanity, or insolvency of the principal or agent
Dissolution of the firm or corporation acting as the agent/principal
Accomplishment of the object or purpose of the agency
Expiration of the period for which agency was constituted

Mnemonics: W-A-R-D-E-D
(Withdrawal, Accomplishment, Revocation, Dissolution, Expiration, Death)
Modes of extinguishment
1. By agreement -5 and 6
2. By subsequent acts of parties (may be by act of both parties/mutual consent, or by
unilateral act of one of them) -1 and 2
3. By operation of law -3 and 4
Continuance and capacity of principal and agent

Agency requires existence and capacity of both parties

Death, civil interdiction, insanity, or insolvency of either party terminates agency
Civil interdiction deprives offender of the right to manage or dispose of his property
during the period of sentence
Dissolution of firm extinguishes its juridical existence; equivalent to death

Modes provided not exclusive

List not exclusive; provides only those causes peculiar to the agency
There are other causes
E.g. novation, loss of the thing, change in laws affecting the object of the agency, etc.

Art. 1920
The principal may revoke the agency at will, and compel the agent to return the
document evidencing the agency. Such revocation may be express or implied.
Agency generally revocable at will by principal

Agency may be terminated by subsequent acts parties

If done by principal, it is called revocation; when done by agent, renunciation
Principal may revoke agency at will (subject to exceptions in Art. 1927)

Authority of agent emanates from the principal, enough that principal should wish to
terminate the agency
Agency is a relationship based on confidence between parties; agency should cease
should confidence disappear
Revocation by will proper whether gratuitous or with compensation

Liability of principal for damage caused by revocation

Principal may have absolute power to revoke

He may still be liable for damages wherein he does not have the right to do so, and he
chooses to revoke agency
Power to revoke different from his right to revoke
Action of indemnity derived not from law, but from the contract of the parties

Kinds of revocation

May be express or implied

Implied e.g. when principal appoints a new agent for the same business or transaction;
when principal directly manages the business entrusted to agent
If authority of agent is in writing, principal may compel him to return the document
evidencing the agency
In order to prevent agent from using the POA and avoid liability to third persons who
may subsequently deal with agent on the faith of the instrument

Art. 1921
If agency has been entrusted for the purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they were not given notice thereof.
Art. 1922
If agent had general powers, revocation of the agency does not prejudice third persons
who acted in good faith and without knowledge of the revocation. Notice of revocation in
a newspaper of general circulation is sufficient warning to third persons.
Effect of revocation in relation to third persons
1. Agency to contract with specific persons
Notice should be given to such third persons; notice should be personal
Failure to give notice will not prejudice such third persons
They have right to presume that the agency continues to exist in the absence of
notification
2. Agency to contract with general public
Advertising the revocation in a newspaper of general circulation is sufficient
notice to third persons
True whether or not such third persons have actually read the newspaper or not

Notice need not be personal

See example page 327

Art. 1923
The appointment of a new agent for the same business or transaction revokes the
previous agency from the day on which notice was given to the former agency, without
prejudice to the provisions of the two preceding articles.
Revocation by appointment of new agent

Implied revocation (provided new agency is incompatible with previous agency)

Revocation does not become effective until appointment of new agent is communicated
to the old agent
Rights of third persons who acted in good faith and without knowledge of the revocation
will not be prejudiced
See example page 328-329

Art. 1924
Agency is revoked if the principal directly manages the business entrusted to the agent,
dealing directly with third persons.
Revocation by direct management of business by principal himself

Implied revocation (unless desire of principal is for him to manage business together
with the agent)
If not, there would no longer be any basis for representation
If purpose of directly dealing with third persons is to avoid payment of agents
commission, revocation deemed made in bad faith; principal still liable to pay agents
commission
See example page 329-330

Art. 1925
When two or more principals have granted a power of attorney for a common
transaction, any one of them may revoke the same without the consent of the others.
Revocation by one of two or more principals

Provided agency was formed for a common transaction, principals are solidarily liable to
the agent for all consequences of the agency
Any of the principals may revoke the agency without the consent of the others
In solidary obligation, act by one is an act by all

Art. 1926
A general power of attorney is revoked by a special one grated to another agent, as
regards the special matter involved in the latter.
Partial revocation of general power

Two agents are involved

One is granted general powers, while another is subsequently granted special powers
Specific power naturally prevails over a general power
See example page 330-331

Art. 1927
An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means
of fulfilling an obligation already contracted, or if a partner is appointed manager of a
partnership in the contract of partnership and his removal from the management is
unjustifiable.
When agency irrevocable

Exception to general rule of absolute power of principal to revoke

1. Agency created not only for interest of the principal, but also for interest of third
persons
2. Agency created for mutual interest of both principal and agent
See example page 331-332

Agency coupled with interest

Not revocable by the sole will of the principal

Revocable when interest ceases
To be irrevocable, interest of the agent shall be in the subject matter of the power
conferred
Not merely an interest in the exercise of the power
It entitles him to compensation therefor
See example page 332-333

Art. 1928
Agent may withdraw from the agency by giving due notice to the principal. If the latter
should suffer any damage by reason of the withdrawal, the agent must indemnify him
therefor, unless the agent should base his withdrawal upon the impossibility of
continuing the performance of the agency without grave detriment to himself.
Right of agent to withdraw

Agent may withdraw from the agency at any time

Regardless of whether the agency was gratuitous or with compensation

Based on constitutional prohibition against involuntary servitude

1. Without cause
Agent has the duty to notify the principal of his withdrawal
If withdrawal without just cause, agent should indemnify the principal for
damages suffered by reason of the withdrawal
2. With just cause
If with valid reason (e.g. based on impossibility of continuing with the agency
without grave detriment to himself)
Or due to fortuitous events
Agent cannot be held liable
He is not required to sacrifice his own interest just to serve the principal

Art. 1929
The agent, even if he should withdraw from the agency for a valid reason, must continue
to act until the principal has had reasonable opportunity to take necessary steps to meet
the situation.
Obligation of agent to continue to act after withdrawal

Must continue to act as agent until principal has had reasonable opportunity to take
necessary steps to remedy the situation
Purpose of law is to prevent damage to principal

Art. 1930
The agency shall remain in full force and effect even after the death of the principal, if it
has been constituted in the common interest of the latter and of the agent, or in the
interest of a third person who has accepted the stipulation in his favor.
When death of principal does not terminate agency
1. Agency constituted in the common interest of the principal and agent
2. Constituted in the interest of a third person who has accepted the stipulation in his favor.
See example page 335
Art. 1931
Anything done by the agent, without knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good faith.
Validity of acts of agent after death of principal

Third persons not prejudiced where agent acted without knowledge of the death of the
principal (or of any other cause which extinguishes the agency)
Requires the agent to act in good faith (as well as the third person)

Agent required to finish the business already begun should delay entail any danger
See example page 336

Art. 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 agents heirs to protect interest of principal

If agent dies, agency also extinguished

Law imposes upon his heirs the obligation to notify the principal of his death
Also obliged to adopt such measures as the circumstances may demand for the interest
of the principal
Agency by operation of law
Heirs can continue agency only temporarily, since essence of agency is personal
confidence