Extinguishment of Agency

COVERAGE OF DISCUSSION:
• MODES OF EXTINGUISHMENT OF AGENCY
• REVOCATION BY PRINCIPAL
• WITHDRAWAL BY THE AGENT
• DEATH OF THE PRINCIPAL
• DEATH OF THE AGENT
Modes of extinguishment of agency

1. By revocation
2. By withdrawal of the agent
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent
A. Death
B. Civil interdiction
C. Insanity
D. Insolvency
Note: Under Article 1323, an offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either the offerer or
the offeree before acceptance is conveyed.
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.
Revocation by principal

1. Revocation, concept
 Revocation refers to the act of the principal of terminating the agency at will confidence and representation being
the foundation of the contract.
2. Who may revoke agency when there are two or more principals
 When the power of attorney was granted for a common transaction, any one of the principals may revoke the
same without the consent of the others. This is consistent with the solidary liability of the principals.
3. Kinds of revocation
A. Express – when made orally or in writing
B. Implied – when revocation can be inferred from the act of the principals as in the following:
1. When a new agent is appointed for the same business or transaction, the previous agency is revoked from the day on
which notice thereof was given to the former agent.
 P gave a general power of attorney to A1 to manage P’s building. Later, P an exclusive authority to A2. A1’s authority is
impliedly revoked upon the giving of the notice. The notice need not indicate that A1’s authority is being revoked; otherwise, it
will become an express revocation.
2. If the principal directly manages the business entrusted to the agent, dealing directly with third persons.
 P gave a general power of attorney to A to manage P’s building. Later, P wrote all the tenants of the building to transact all
business with him alone. A’s authority is impliedly revoked.
3. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter
involved in the latter.
 P gave a general power of attorney to A1 to manage P’s building. As manager, A1’s authority includes, among other powers,
building administration, maintenance, repairs, electrical works. Later, P, appointed A2, who is an expert electrician, to manage
the electrical works of the building. A1’s authority with respect to electrical works is impliedly revoked.
4. When agency may not be revoked at will
A. If a bilateral contract depends upon the agency.
 P sold his lot and building to A for 2,000,000 under the following terms; down payment of 80,000; balance of 1,200,000 to
be paid in 24 equal monthly installments of 50,000. The parties stipulated that (1) the transfer certificate of the title to the
lot and building will be delivered to A upon full payment of the balance of the purchase price; and (2) A will be given a
general power of attorney to manage the building with his salary of 50,000 to be applied to the installments. Here, P cannot
revoke the agency at will because a bilateral contract depends upon it with A being obligated to pay the purchase price and
P to deliver the transfer certificate of the title to the property.

B. If the agency is a means of fulfilling an obligation already contracted.

C. If a partner is appointed manager of a partnership in the contract of partnership and his removal from the
management is unjustifiable.
5. Notice of revocation
A. If the agency has been entrusted for the purpose of contracting with specified persons, the
principal must give a timely notice of the revocation to such third persons.
B. If the agent had general powers, i.e., he was entrusted to contract with public or any person,
revocation of the agency does not prejudice third persons who acted in good faith and without
knowledge of the revocation.
Withdrawal by the agent

1. How withdrawal is made

 By the agent giving due notice to the principal of his withdrawal.
2. Liability/obligation of an agent who withdraws
A. The agent must indemnify the principal for any damage suffered by the latter by reason of the
withdrawal, unless the agent should base his withdrawal upon the impossibility of continuing
the performance of the agency without grave detriment to himself.
B. The agent who withdraws must continue to act as such until the principal has had reasonable
opportunity to take the necessary steps to meet the situation, even if he withdraws for a valid
reason.
Death of the principal

1. When death of principal does not extinguish the agency

 As a general rule, the death of the principal extinguishes the agency. However, the agency is not
extinguished in the following:
A. If the agency has been constituted in the common interest of the principal and the agent.
B. If the agency has been constituted in the interest of a third person who has accepted the stipulation in
his favor.

2. Validity of agent’s acts without knowledge of the death of the principal or other cause of
extinguishment of the agency.
Death of the agent

1. Effect of death of agent on agency

 The death of the agent extinguishes the agency.
2. Duty of agent’s heir
A. To notify the principal of the agent’s death.
B. To adopt in the meantime such measures as the circumstances may demand in the interest of the
principal.