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This article was originally published on June 1, 2022 and has been updated to reflect recent legal developments.

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

AT A GLANCE:

The underlying principle of the contract of agency is to accomplish results by using the services of others – to do a great variety of things. Its aim is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. Its basis is representation.

An agency does not last indefinitely. 

In Westmont Investment Corporation v. Amos P. Francia, G.R. No. 194128, December 07, 2011, the Supreme Court held that the underlying principle of the contract of agency is to accomplish results by using the services of others – to do a great variety of things. Its aim is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. Its basis is representation

Under the Civil Code of the Philippines, a contract of agency may be terminated or extinguished in several ways, either by the will of the parties or by operation of law. 

The governing provision is Article 1919 which expressly enumerates the modes by which an agency is extinguished.

Article 1919 provides that 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.

Extinguishment by its revocation (Article 1919(1))

In De Joya v. Madlangbayan, G.R. No.228999, April 28, 2021, a contract of agency is extinguished by its revocation. As agency is a personal contract of representation that is based on the trust and confidence reposed by the principal upon the agent, it may be revoked by the principal at will. 

Under 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.

Implied Revocation

Revocation may also occur impliedly in the following instances:

1. 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.  (Article 1923)
2. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. (Article 1924)
3. 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. (Article 1925)
4. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. (Article 1926)

Limitation on Extinguishment by Revocation

Revocation is not absolute. Article 1927 provides that 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. 

Extinguishment by Withdrawal of the Agent (Article 1919(2))

Agency may also be extinguished by the withdrawal or renunciation of the agent.

Under 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 therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself.

Even if the withdrawal is justified, Article 1929 requires 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. 

Thus, while the agent has the right to renounce the agency, the law ensures that such withdrawal is exercised responsibly and in good faith.

Extinguishment by Operation of Law 

Agency is also extinguished automatically upon the occurrence of certain events. 

Under Article 1919(3), agency is terminated by the death, civil interdiction, insanity or insolvency of the principal or of the agent. 

To protect persons acting in good faith:

1. Article 1931 provides that 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.
2. Under 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.

Additionally, under Article 1919(4), agency is extinguished by the dissolution of the firm or corporation which entrusted or accepted the agency.

Extinguishment by Accomplishment of Purpose and Expiration of Term

Agency may also terminate naturally.  Article 1919(5) provides that agency is extinguished by the accomplishment of the object or purpose of the agency. While Article 1919(6) states that agency may be extinguished upon the expiration of the period for which the agency was constituted.

Related Articles:

• MAY AN AGENT APPOINT A SUBSTITUTE OR SUB-AGENT?
• WHAT IS AGENCY TO SELL?
• MAY PRINCIPAL APPOINT TWO OR MORE AGENT FOR A COMMON TRANSACTION?

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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