Article 1910 The principal must comply with all the form all fault.

form all fault. The reimbursement shall include interest on the

obligations which the agent may have contracted within the sums advanced, from the day on which the advance was
scope of his authority. As for any obligation wherein, the made.
agent has exceeded his power, the principal is not bound
It is the principal’s obligation to give the money up front so it
except when he ratifies it expressly or tacitly.
can carry out the agency.
All agreements that the agent might have made within the
Even if the venture or business was unsuccessful, the agent
bounds of his authority are subject to compliance by the
must be reimbursed by the principal if they were advanced,
principal. And that agreement or the principal’s primary
assuming the agency was faultless. Because the agent does
obligation to the agent is simply to comply with all the terms
not promise that the business entrusted to him will be
and conditions of their employment contract.
successful; rather, he just commits to acting as the principal's
The principal is not obligated to fulfill any duty when the representative.
agent has gone beyond his authority unless he directly or
Article 1913 The principal must also indemnify the agent for
implicitly ratifies it.
all the damages which the execution of the agency may have
Without such ratification, the agent is the one personally caused the latter, without fault or negligence on his part.
liable.
Since the principal receives the benefits of the agency, then he
Ratification is the adoption or affirmation of a preceding act is responsible for covering the agent for any losses that
by a person that does not bind him but nevertheless was resulted from the execution of the agency without the agent's
carried out or purported to be carried out on his behalf, giving fault or carelessness.
the acts the same legal force as if they had been given by him.
The agent liable to principal for damages which makes the
The doctrine is applicable when an agent acts outside the agent liable to the principal for damages which the latter may
scope of his or her power or when one who falsely represents suffer through the agent's non-performance or because of his
themselves as an agent. fraud or negligence on his part, the principal should
indemnify or compensate the latter.
-action of signing or giving formal consent to a treaty,
contract, or agreement, making it officially valid. Article 1914 The agent may retain in pledge the things which
are the object of the agency until the principal effects the
Article 1911 Even when the agent has exceeded his authority,
reimbursement and pays the indemnity set forth in the two
the principal is solidarily liable with the agent if the former
preceding articles.
allowed the latter to act as though he had full powers.
Until the principal processes the reimbursement and pays the
If the principle permitted the agent to operate as if he had full
indemnity or compensation, the agent has the right to hold
authority, even when the agency went beyond his bounds, the
onto the items that are the subject of the agency as collateral.
principal is jointly and severally liable with the agent.
Article 1915 If two or more persons have appointed an agent
Article 1911 is bound by the principle of estoppel, which is the
for a common transaction or undertaking, they shall be
purpose is to protect third parties acting in good faith relying
solidarily liable to the agent for all the consequences of the
on such agent’s representation. This means that the third
agency.
person may demand from either the principal or agent or
both. Principal may be sued by the agent for the entire amount due,
while if there are two or more people appoint an agent to
A person cannot deny or make an assertion that is counter to
handle a shared transaction or endeavor, they are all jointly
what has been established through estoppel. It has been
and severally accountable to the agent for the consequences
proven to be true by his own action or portrayal, whether
even though they have been appointed at the same time.
expressed or inferred.
Article 1916 When two persons contract with regard to the
An admission or representation is made conclusive on the
same thing, one of them with the agent and the other with
person making it through estoppel. It cannot be refuted or
the principal, and the two contracts are incompatible with
disputed in relation to the one who relies on it.
each other, that of prior date shall be preferred, without
Article 1912 The principal must advance to the agent, should prejudice to the provisions of article 1544.
the latter so request, the sums necessary for the execution of
When two people enter into agreements on the same subject,
the agency. Should the agent have advanced them, the
one with the agent and the other with the principal, and the
principal must reimburse him thereof, even if the business or
agreements are incompatible with one another, the
undertaking was not successful, provided the agent is free
agreement from the earlier date shall take priority.
“If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should
be movable property.”
“Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property.”
“Should there be no inscription, the ownership shall pertain
who, in good faith was first in the possession; and in the
absence thereof, to the person who presents the oldest title,
provided there is good faith.”
Article 1917 In the case referred to in the preceding article, if
the agent has acted in good faith, the principal shall be liable
in damages to the third person whose contracts must be
rejected. If the agent acted in bad faith, he alone shall be
responsible.
The principal shall be liable for damages to the third party
whose contracts must be rejected if the agent acted in good
faith. If the agent acted in bad faith, he alone is accountable
to the third person.
Article 1918 The principal is not liable for the expenses
incurred by the agent in the following cases: 1) If the agent
acted in contravention of the principal’s instructions, unless
the latter should wish to avail himself of the benefits derived
from the contract. 2) When the expenses where due to the
fault of the agent. 3) When the agent incurred them with
knowledge that an unfavorable result would ensue, if the
principal was not aware thereof. 4) When it was stipulated
that the expenses would be borne by the agent, or that the
latter would be allowed only a certain sum.
These four cases provided in this article will make principal
free from any liabilities for expenses incurred by the agent. 1)
to punish the agent. 2) fault of agent. 3) the agent is guilty of
bad faith and lack of diligence. 4) express stipulation is not
contrary to law, morals, etc., is binding between parties.
Article 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
dissolution of the firm or corporation which entrusted or
accepted the agency. 5) By accomplishment of the object or
purpose of the agency. 6) By the expiration of the period for
which the agency was constituted.
Both the principal and the agent must be real and able to act
in the case of agency. As a result, the agency is terminated
upon the death, civil dissolution, insanity, or insolvency of any
party.
• An agency does not last forever. Like most consensual
agreements, the relationship usually comes to an end
at some point.
• Termination can take place because of something
done by the parties themselves or of something
beyond their control, i.e., by operation of law.
Article 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.
The agency may be revoked by the principal at any time, and
the agent may be required to surrender the paperwork
proving the agency. Both an express and an implicit
revocation may apply.
An agency may be terminated by the subsequent acts of the
parties. Revocation – when done by the principal and
Renunciation – when done by the agent.
REVOCATION BY PRINCIPAL GENERAL RULE: The principal
may: (1) Revoke the agency at will; and (2) Compel the agent
to return the document evidencing the agency.
Qualifications: The right of the principal to terminate the
authority of his agent is absolute and unrestricted, except
that he is liable for damages in case: (1) He revokes the
agency in bad faith or (2) He revokes the agency before the
expiration of the period stipulated in the agency contract.
Exception: Agency cannot be revoked if it is coupled with an
interest, such that: (1) A bilateral contract depends upon it;
(2) It is the means of fulfilling an obligation already
contracted; or (3) A partner is appointed manager of a
partnership in the contract of partnership and his removal
from the management is unjustifiable.
Renunciation of agency by agent Agency terminable at will
• Just as the principal has the power to revoke the agency at
will, so too, the agent has the power to renounce the agency
relationship giving notice to the principal that he will no
longer serve as an agent. In effect, the agent resigns.
• Thus, if there is no contract existing between the parties or
if the contract is for no fixed or definite period of time, it is
terminable by the agent at will.
• Even in the face of an express contract, the agent has the
power to renounce the agency, since an agency relationship is
voluntary, although under such circumstances, his breach of
contract may create a liability for wrongful termination. (Art.
1928.) Form of renunciation
• It is not always necessary for the agent to renounce the
agency expressly.
• It may be implied, as for example, where he has conducted
himself in a manner clearly incompatible with his duties as
agent as when an agent abandons the object of his agency
and acts for himself in committing a fraud upon his principal,
his capacity as agent ceases, or when he files complaint
against the principal in connection with the agency.
• On the other hand, the mere fact that the agent violates his
instructions does not amount to a renunciation, and although
he may thus render himself liable to the principal, he does
not cease to be an agent.
Article 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.
The revocation of the agency, if it had been entrusted with the
task of contracting with specific individuals, would not harm
those individuals if they hadn't been informed.
Article 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.
Revocation of the agency does not harm third parties that
acted in good faith and without being aware of the revocation
if the agent possessed general powers. A general circulation
newspaper's announcement of the cancellation is adequate to
alert third parties.
Effect of revocation in relation to third persons
(1) Agency to contract with specific persons
• If the agency is created for the purpose of
contracting with specific persons, its revocation will not
prejudice such third person until notice thereof is given them.
(Art. 1921.)
• Since the third persons have been made to believe
by the principal that the agent is authorized to deal with
them, they have a right to presume that the representation
continues to exist in the absence of notification by the
principal. Of course, notice is not required if the third persons
already know of the revocation.
(2) Agency to contract with general public
• In case the agent has general powers (as when the
agent has been appointed to manage a business), innocent
third persons dealing with the agent will not be prejudiced by
the revocation before they had knowledge thereof.
• In this case however, the fact that the revocation
was advertised in a newspaper of general circulation would
be sufficient warning to third persons (Art. 1922.) for the
publication constitutes notice upon everybody and this is true
whether or not such third persons have read the newspaper
concerned.
• Under Article 1921, the notice of revocation must
be personal; under Article 1922, it may be personal. (Art.
1873.
Article 1923 The appointment of a new agent for the same
business or transactions revokes the previous agency from
the day on which notice thereof was given to the former
agency, without prejudice to the provisions of the two
preceding articles.
The previous agency is revoked the day after notification of
the appointment of the new agent was given to the prior
agent for the same business or transactions.
Revocation by appointment of new agent
There is implied revocation of the previous agency
when the principal appoints a new agent for the same
business or transaction provided there is incompatibility.
(1) In such case, the revocation does not become
effective as between the principal and the agent until it is in
same way communicated to the latter.
(2) Again, the rights of third persons who acted in
good faith and without knowledge of the revocation will not
be prejudiced thereby.
Article 1924 The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly
with third persons.
The agency is revoked if the principal manages the business
that was given to the agent personally, interacting with third
parties.
Revocation by direct management of business by principal
himself. The above article provides for another case of
implied revocation.
(1) Unless the only desire of the principal is for him
and the agent to manage the business together, 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.
(2) If the purpose of the principal in dealing directly
with the purchaser and himself effecting the sale, for
example, is to avoid payment of his agent's commission, the
implied revocation is deemed made in bad faith and cannot
be sanctioned without, according to the agent, the
commission which is due him.
Article 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.
Any one of the parties who has signed a power of attorney on
their behalf for a shared transaction may revoke it without
the other principal’s approval.
Revocation by one of two or more principals
• The appointment of an agent by two (2) or more
principals for a common transaction or undertaking makes
them solidarily liable to the agent for all the consequences of
the agency.
• Consequently, one of the principals is granted
under this article the right to revoke the power of attorney
without the consent of the others.
• In a solidary obligation, the act of one is considered
by law as the act of all.
Article 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.
Partial revocation of general power
• 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.
Article 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 form the management is unjustifiable.
When agency irrevocable
• The general rule is that the principal may revoke an agency
at will.
• The reason for the rule is that the essence of agency is the
agent's duty of obedience to the principal. This rule, however,
has exceptions and they are: (1) When the agency is created
not only for the interest of the principal but also for the
interest of third persons; and (2) When the agency is created
for the mutual interest of both (3) the principal and the agent.
• In these cases, it is evident that the agency cannot be
revoked by the sole will of the principal. Article 1927
mentions three (3) instances of irrevocability.
Agency coupled with an interest.
• An agency coupled with an interest cannot be terminated by
the sole will of the principal although it is so revocable after
the interest ceases.
• In order that, an agency may be irrevocable because it is
coupled with an interest, it is essential that the interest of the
agent shall be in the subject matter of the power conferred
and not merely an interest in the exercise of the power
because it entitles him to compensation therefor.
• Thus, an agency is coupled with an interest where the agent
has parted with value or incurred liability at the principal's
request, looking to the exercise of the power as the means of
reimbursement or indemnity.
Article 1928 The 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 thereof, unless the agent should base his
withdrawal upon the impassability of continuing the
performance of the agency without grave detriment to
himself.
Right of agent to withdraw
• Just as the principal may revoke generally the agency at will
(Art. 1920.), the agent may likewise withdraw from the
agency at any time.
• This rule which applies whether the agency is gratuitous or
for compensation is based on the constitutional prohibition
against involuntary servitude.
(1) Without just cause. The law imposes upon the agent the
duty to give due notice to the principal and if the withdrawal
is without just cause, to indemnify the principal should the
latter suffer damage by reason of such withdrawal. The
reason for the indemnity imposed by law is that the agent
fails in his obligation and as such, he must answer for losses
and damages occasioned by the non-fulfillment.
(2) With just cause - If the agent withdraws from the agency
for a valid reason as when the withdrawal is based on the
impossibility of continuing with the agency without grave
detriment to himself or is due to a fortuitous event the agent
cannot be held liable. While the agent is forbidden to prefer
his interests to those of the principal he is not required to
sacrifice his own interest just to serve the principal.
Article 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.
Obligation of agent to continue to act after withdrawal.
• Even when the agent withdraws from the agency for a valid
reason he must continue to act until the principal has had a
reasonable opportunity to take the necessary steps (like the
appointment of a new agent) to remedy the situation caused
by the withdrawal.
• The purpose of the law is to prevent damage to the
principal.
Article 1930 The agency shall remain 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.
• 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.

When death of principal does not terminate agency.

• Agency is terminated by the death of the principal.

• Agency, being based on representation, there is no one to

be represented where the principal is already dead.

However, there are exceptions to this rule. In the following

cases, the agency remains in full force and effect even after
the death of the principal: (1) If the agency has been
constituted in the common interest, of the principal and the
agent and (2) If it has been constituted in the interest of a
third person who has accepted the stipulation in his favor.

Article 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 the third persons who may have contracted
with him in good faith.

Validity of acts of agent after death of principal

• The death of the principal extinguishes the agency 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, 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 but also to adopt
such measures as the circumstances may demand for the
interest of the principal.