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CHAPTER 4 (5)
EXTINGUISHMENT OF AGENCY
Art. 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or insolvency of the
principal or of the agent;
(4) By the dissolution of the firm or corporation which entrusted or
accepted the agency;
(5) By the accomplishment of the object or purpose of the agency;
(6) By the expiration of the period for which the agency was
constituted. (1732a)
Other mode of extinguishment includes:
(7) Mutual withdrawal from the relationship by the principal
and agent;
(8) By the happening of a supervening event that makes illegal
or impossible the objective or purpose for which the agency
was constituted, like the destruction of the subject matter
which is the object of the agency.
Principal’s revocation of the Agency
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. (1733a)
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. (n)
As a General Rule, the principal in keeping with the truism
that an agency is a personal relationship founded on trust and
confidence, may revoke an agency relation. As contrasted with
the remedy of recission which requires the existence of
substantial breach of contract.
XPT: If the revocation will result to breach of contract in cases
such as: (1) Agency was constituted as “irrevocable”
(2) For a definite term (Example in a contract of agency to
dispose of, sell, cede, transfer and convey --- until all the
subject property as subdivided is fully disposed of. If the
principal before all the lots in the subdivision has been
disposed of, there would be breach of contract. Principal will
be liable for damages);
- In this case the principal shall be liable for damages
including the compensation due the agent when the revocation
when done in bad faith (Example: When the revocation was
done to avoid the payment of the commission earned by the
agent).
-Hence in good faith, may be allowed to be
terminated even with fixed period (Danon v Brimo & Co).
(3) AGENCY COUPLED WITH INTEREST!!! (See 1927)
XPT to XPT: When there’s fraud by the agent.
Kinds of Revocation (Express or Implied)
Implied: When the principal appoints a new agent for the
business or transaction or when the principal directly manages
the business entrusted to the agent. (1923/1924)
Express: in written/ oral revocation -- notice.
**When ‘revoked’ by the agent (under Par 2 of 1919) it is
usually called ‘renunciation’ [De Leon, 2010]
1925: Applies when there are two or more principals. The rule
enunciated in said article is consistent with the rule under 1915
that the obligation of two or more principals to a common
agent is solidary, and consequently, the power to revoke
agency can be made by the will of one of the principals.
A. EXPRESS REVOCATION
Art. 1921. If the 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. (1734)
Art. 1922. If the 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 the revocation in a newspaper
of general circulation is a sufficient warning to third persons. (n)
If the authority of the agent is in writing, the principal
can compel the agent to return the document evidencing the
agency. The purpose is to prevent the agent from making use
of the power of attorney and thus avoid liability on third
persons who may subsequently deal with the agent on the
faith of the instrument.
If the agent fails or refuses to return the power of
attorney, it is incumbent upon the principal to give proper
notice to the members of the public who may be affected by the
revocation.
1873: The power shall continue to be in full force until the
notice is rescinded in the same manner in which it was given.
B. IMPLIED REVOCATION
Art. 1923. The appointment of a new agent for the same business or
transaction revokes the previous agency from the day on which notice
thereof was given to the former agent, without prejudice to the
provisions of the two preceding articles. (1735a)
Art. 1924. The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third persons. (n)
Art. 1926. A general power of attorney is revoked by a special one
granted to another agent, as regards the special matter involved in the
latter. (n)
1. Appointment of new agent for same business
The critical time when the agency is revoked is “from
the day on which notice thereof was given to the former
agent.”

Case: Garcia vs De Manzano: Without evidence showing
that the son (former agent) was informed of the issuance
of the power of attorney to the mother (alleged new
agent), the transaction effected by the son pursuant to his
power of attorney is valid and binding.
2. Principal directly manages the business
The direct management of the business by
the principal and directly dealing with third parties
shall be deemed to produce the effect of revocation
when such acts would be inconsistent with the terms
of the power of attorney previously given to the
agent.
Unless the only desire of the principal is for
him and the agent to manage the business together or
to execute acts of ownership and administration, the
effect of the direct management of the business by the
principal himself is to revoke the agency for there
would no longer be any basis for the representation
previously conferred.
3. Special power of attorney revokes a general power
of attorney
1926: In this article two (2) agents are
involved: one to whom a general power is previously
granted and the other, to whom a special power is
subsequently conferred. A specific power naturally
prevails over a general power.
Example: A appoints B as a manager of A’s
business. The authority of B to manage A’s business
include the authority to enter into contracts of
employment of such personnel necessary to conduct
business.
If subsequently, A grants special power to C
to hire personnel for his business, then as regards this
matter of hiring employees, the general power
granted to B is revoked. As to matters not covered by
the special power, the general power remains valid.
C. REVOCATION ON THE BASIS OF BREACH OF TRUST
The principle of breach of confidence as the lawful
basis for revocation of the agency arrangement is valid. The
position of the agent is essentially one of confidence and the
fiduciary role of the agent implies that when he has breach of
trust and confidence reposed in him by the principal, then it
would constitute basis for revocation, which is equivalent to
recission in general.
Agency coupled with interest is generally irrevocable.
The exception is when the agent committed fraud.
D. Revocation of General Power of Attorney
See Article 1922. Notice of the Revocation in a
newspaper of general circulation is a sufficient warning to
third oersons.
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In Rammani v CA: in a general power of attorney to deal with
the general public, the fact of revocation must be advertised in
a newspaper of general circulation to be sufficient as notice to
third persons.
E. Revocation of Special Power of Attorney
Depends upon the contract / SPA.
F. IRREVOCABLE AGENCIES
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. (n)
GR: Principal may revoke an agency at will (See 1920)
XPT: In 1927, Agency cannot be revoked when:
(Agencies COUPLED WITH INTEREST):
1. A bilateral contract depends upon the agency for its
fulfilment;
EG: P sold to B a factory for 1Mphp. B paid only
P800K. It was stipulated that the ownership in the factory
would be transferred to B only after the payment of the
balance (200k) to be made within 6 months. It was further
agreed that P would appoint A to manage the factory and
that any profits would be used to pay off the balance of the
purchase price.
Here, P cannot revoke the agency at will for a
bilateral contract depends on it.
2. It is the means of fulfilling an obligation already
contracted;
EG: P borrowed from B P50K. As a security for
the debt, P gives A power of attorney to collect rents due
from tenants of P and authorizes A to apply the same to the
debt of P50K.
Here, P cannot revoke the agency, without
justifiable cause, for it is a means of fulfilling an obligation.
3. A partner is appointed manager of a partnership in
the contract of partnership and his removal from the
management is unjustifiable.
EG: A, B and V are partners in a business by
common agreement. A was appointed a manager in the
articles of partnership (written document embodying the
contract of partnership). The appointment of A is revocable
only upon just and lawful cause and upon the vote of the
partners representing the controlling interest.
Rationale for its irrevocability: - The agency is created not only
for the interest of the principal but also for the interest of 3rd
parties.
- The agency is created for the mutual interest of principal and
agent.
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Note: Effect of revocation: Principal will be liable for damages
from breach of contract and in some cases compensation due to
the agent.
Examples of agency coupled with interest:
(1) Real estate mortgage pursuant to the requirement of 3135
which would empower the mortgagee upon the default of the
mortgagor to payment the principal obligation, to effect the
sale of the mortgage property through extrajudicial
foreclosure. [Perez v PNB]
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 the necessary steps to meet the
situation. (1737a)
Just as the principal may revoke generally the agency at will,
the agent may likewise withdraw from the agency at any time
by giving due notice to the principal. This rule applies whether
the agency is gratuitous or for compensation and is based on
the constitutional prohibition against involuntary servitude.

(2) Insurance Agent: where the agent is not merely for the Without Just Cause With Just Cause
benefit of the principal, but allows the agent to build business -Has the duty to give notice to - Agent withdraws for a valid
interests that would yield gains in terms of commission on a the principal reason as when the
long-term basis. [Valenzuela v CA] -To indemnify the principal withdrawal is based on the
should the latter suffer impossibility of continuing
(3) Where the SPA was granted to the agent by the landowner damage with the agency without
primarily to enable the agent to effectively settle the sale of -The reason for the indemnity grace detriment to himself, or
several lots. [Bacaling v Muya] imposed by law is that the is due to fortuitous event, the
agent fails in his obligation agent cannot be held liable.
It must be noted that just because the terms of the agency and as such, he must answer - While the agent is forbidden
agreement grants by way of commission, such amount of the for losses and damages to prefer his own interests to
purchase price that is above indicated price of the principal occasioned by the non- those of the principal (1889),
(over-price), does not constitute the agency once that is fulfillment (1884 & 1170) he is not required to sacrifice
coupled with interest. his own interest just to serve
the principal.
Thus, an agency is deemed as one coupled with an interest
where it is established for the MUTUAL BENEFIT of the 1929: Even when the agent withdraws from the agency for a
principal and agent, or for THE INTEREST OF PRINCIPAL valid reason he must continue to act until the principal has had
AND 3RD PARTIES, and it cannot be revoked by the principal the reasonable opportunity to take the necessary steps (like the
so long as the interest between the recently mentioned subsists. appointment of a new agent) to remedy the situation caused by
the withdrawal. The purpose is to prevent damage to
In an agent coupled with interest, the agent’s interest must be principal.
in the subject matter conferred and not merely an interest in
the exercise of power because it entitles him to compensation. H. DEATH, INCAPACITY OR INSOVENCY OF THE
When an agent’s interest is confined to earning his agreed PRINCIPAL
compensation, the agency is not coupled with interest, since an
agent’s interest in obtaining his compensation as such agent is Since agency is both a fiduciary and a representative
an ordinary incident of the agency relationship. relationship, the death of the principal automatically
extinguishes the contract, for certainly even if the agent is
The ruling emphasizes the character of agency as being willing to go on [See Rallos v Felix Go Chan]
primarily a PREPARATORY CONTRACT, in the sense that is
meant to the medium by which contracts and other juridical 1. When the agency continues despite death of principal
acts are entered into with 3rd parties.
GR: Agency is terminated by death of principal. The reason is
Remember that: the revocable nature of the agency MUST because Agency, being based on representation, there is no one
GIVE WAY TO MAKING EFFECTICE, BINDING AND to be represented where the principal is already dead.
ENFORCEABLE ANY “BILATERAL CONTRACT WHICH XPT:
DEPENDS UPON” THE EXISTENCE OF THE AGENCY FOR Art. 1930. The agency shall remain in full force and effect even after the
ITS ENFORCEMENT AND REALIZATION. death of the principal, (1) if it has been constituted in the common
interest of the latter and of the agent, or (2) in the interest of a third
person who has accepted the stipulation in his favor. (n)
G. WITHDRAWAL OF THE AGENT FROM THE AGENCY

Art. 1928. The agent may withdraw from the agency by giving due **Another notable exception is when: The agent is required to
notice to the principal. If the latter should suffer any damage by reason “Finish the business already begun on the death of the principal,
of the withdrawal, the agent must indemnify him therefor, unless the should delay entail danger” [1884, Par2].
agent should base his withdrawal upon the impossibility of continuing
the performance of the agency without grave detriment to himself.
(1736a)
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2. Effects of acts done by agent without knowledge of
Principal’s death
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. (1738)
The same way that revocation of the agency does not prejudice
3rd persons who have dealt with the agent in good faith
without notice of the revocation (Arts 1921 & 1922.), such 3rd
persons are protected where the agent (and the 3rd persons/s)
acted without the knowledge of the death of the principal.
corporation for any and all purpose that seek the liquidation of
its assets and the payment of all its liabilities.
OBLIGATIONS OF THE AGENT WHEN THE AGENCY IS
EXTINGUISHED
The fiduciary nature of the contract requires that even
when the agency is terminated, the agent is bound to keep
confidential such matters and information which he learned in
the course of the agency when the nature of such matter or
information is confidential, such as business secrets.

Case: Rallos v Go Chan: Article 1931 is the applicable law.

Under this provision, an act done by the agent after the death
of his principal is valid and effective only under two
conditions, viz: (1) that the agent acted without knowledge of
the death of the principal and (2) that the third person who
contracted with the agent himself acted in good faith. Good
faith here means that the third person was not aware of the
death of the principal at the time he contracted with said agent.
These two requisites must concur the absence of one will
render the act of the agent invalid and unenforceable.

J. DEATH, INCAPACITY OR INSOVENCY OF THE AGENT

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. (1739)

Article 1919 (3) provides that the death, civil interdiction,

insanity or insolvency of the agent extinguishes the agency.

The law imposes an obligation (to notify the principal of the

death of the agent) upon persons who are not parties to a
contractual relationship, and that fact of one that has already
been extinguished by the death of the agent.

In case of Multiple Agents

In cases, where there are several agent constituted for the same
business or property, the death (insanity, insolvency etc), but
not all of them would extinguish the agency, with respect to
those who remain living.

On the other hand, when it is clear that the several agents is

constituted as a common solid group and not individually,
then the death (insanity, insolvency etc) would legally
terminate the agency.

Dissolution of a Corporation
The dissolution of a corporation extinguishes its
juridical personality.
However, the dissolved corporation has within three
years after its dissolution to have juridical personality for
purposes of liquidation. The Board of Directors and corporate
officers continue to have agency powers to represent the
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