Powers of the agent

AUTHORITY OF AN AGENT
Authority is the power of the agent to affect the legal relations of his principal by acts done in accordance
with the principals manifestations of consent.
An agent can make the principal legally responsible only when he is authorized by the principal to act the
way he did.
KINDS OF AUTHORITY
(1) Actual, when it is actually granted, and it may be express or implied. It is the authority that the agent
does, in fact, have. It results from what the principal indicates to the agent;
(2) Express, when it is directly conferred by words;
(3) Implied, when it is incidental to the transaction or reasonably necessary to accomplish the main
purpose of the agency;
(4) Apparent or ostensible, when it arises by the acts or conduct of the principal giving rise to an
appearance of authority. It makes the principal responsible to third persons for certain actions of the
agent that were not really authorized;
(5) General, when it refers to all the business of the principal;
(6) Special, when it is limited only to one or more specific transactions; and
(7) By necessity or by operation of law, when it is demanded by necessity or by virtue of the existence of
an emergency. The agency terminates when the emergency passes.
SCOPE OF AUTHORITY
General rule: The scope of the authority of the agent is what appears in the terms of the power of attorney
[Siredy Enterprises v. CA (2002)].
Exceptions: An agent is considered acting within the scope of his authority when:
(1) He performs acts which are conducive to the accomplishment of the purpose of the agency [Article
1881];
(2) He performed the agency in a manner more advantageous to the principal than that specified by said
principal [Article 1881];
(3) The principal ratifies the act, expressly or tacitly [Article 1910].
So far as third persons are concerned, an act is deemed to have been performed within the scope of the
agent's authority if such act is within the terms of the power of attorney, as written, even if the agent has
in fact exceeded the limits of his authority according to an understanding between the principal and the
agent. [Article 1901]
While third persons are bound to inquire into the extent or scope of the agents authority, they are not
required to go beyond the terms of the written power of attorney. Third persons cannot be adversely
affected by an understanding between the principal and his agent as to the limits of the latters authority.
In the same way, third persons need not concern themselves with instructions given by the principal to his
agent outside of the written power of attorney. [Siredy Enterprises v. CA (2002)]
POWER TO BIND THE PRINCIPAL
Requisites:
(1) The agent must act within the scope of his authority; and
(2) The agent must act in behalf of the principal.
Even when the agent acts in his own name, however, the principal is still bound, when the contract
involves things belonging to the principal [Article 1883] or when the principal ratifies the contract,
expressly or tacitly [Article 1910].
EFFECTS OF ACTS OF AN AGENT
In summary, when the agent acts:
(1) With authority of the principal:

(a) If done in the name of the principal, the principal is bound to comply with the obligations contracted
[Article 1910] and the agent is not personally liable to the party with whom he contracts [Article 1897];
(b) If done in the name of the agent, the agent is the one directly bound in favor of the person with whom
he has contracted, except when the contract involves things belonging to the principal;
(2) Without authority or beyond the authority granted by the principal:
(a) If done in the name of the principal, it is unenforceable against him, unless he ratifies it expressly or
tacitly [Article 1910].
(b) If done in the name of the agent, he is personally liable.

Obligations of the agent

OBLIGATIONS, IN GENERAL
GOOD FAITH AND LOYALTY TO HIS TRUST

The duty of good faith is also called the fiduciary duty, which imposes upon the agent the obligation of
faithful service. The duty to be loyal to the principal demands that the agent look out for the best interests
of the principal as against his own or those of third parties. [See Article 1889]
Thus, an act of the agent which tends to violate his fiduciary duty is not only invalid as to the principal, but
is also against public policy.
Presumption: Until proven otherwise, however, the presumption arises that an agent has performed his
duty in good faith, and the principal, until notice is received of a breach of relational duties, may rely upon
his agent's faithfulness.
Exception: The presumption does not arise when there is no relation of trust or confidence between the
parties (e.g., the agent is bound merely as an instrument/servant, or there is no agency relationship). [De
Leon (2010)]
OBEDIENCE TO PRINCIPAL'S INSTRUCTIONS

General rule: An agent must obey all lawful orders and instructions of the principal within the scope of the
agency. If he fails to do so, he becomes liable for any loss the principal incurs even though he can show
that he acted in good faith or exercised reasonableness. [See Article 1887]
EXERCISE OF REASONABLE CARE

By accepting an employment whose requirements he knows, without stipulating otherwise, the agent
impliedly undertakes that he possesses a degree of skill reasonably and ordinarily competent for the
performance of the service, and that in performing his undertaking, he will exercise reasonable care, skill
and diligence. [De Leon (2010)]
The specific obligations of the parties to each other are merely specific applications of the general
fiduciary obligation [De Leon (2010)].
OBLIGATION TO CARRY OUT AGENCY
General rule: The agent is:
(1) Bound by his acceptance to carry out the agency;
(2) Liable for damages, which the principal may suffer, in case of non-performance;
(3) Bound to finish the business already begun on the death of the principal should delay entail danger.
[Article 1884]
Exception: An agent shall not carry out an agency if its execution would manifestly result in loss or
damage to the principal [Article 1888].
OBLIGATION IN CASE HE DECLINES AGENCY
In case a person declines an agency, he is bound to observe the diligence of a good father of a family in
the custody and preservation of the goods forwarded to him.

The obligation lasts until the owner, as soon as practicable:

(1) Appoints an agent; or
(2) Takes charge of the goods. [Article 1886]
The case treated in this provision is different from withdrawal. In this case, no agency was formed.
Withdrawal presupposes an existing agency. The obligation of the agent, in case of withdrawal, is to
continue to act as such agent until the principal has had reasonable opportunity to take the necessary
steps to meet the situation. [Article 1929]
OBLIGATION TO ADVANCE NECESSARY FUNDS
General rule: The agent is not bound to advance the necessary funds. The principal is obliged to advance
to the agent, should the latter so request, the sums necessary for the execution of the agency.
Exception: He shall be bound to do so should there be a stipulation to that effect, subject to the obligation
of the principal to reimburse the agent.
Exception to the exception: He is not bound to do so, even when there is a stipulation, when the principal
is insolvent. [Article 1886]
Note: Insolvency of the principal is also a ground for extinguishment.
OBLIGATION TO ACT IN ACCORDANCE WITH
INSTRUCTIONS
In the execution of the agency, the agent shall act in accordance with the instructions of the principal.
In the absence of such instructions, he shall do all that a good father of a family would do, as required by
the nature of the business. [Article 1887]
Note: The limits of the agent's authority shall not be considered exceeded should it have been performed
in a manner more advantageous to the principal than that specified by him [Article 1882].
A
Authority
Instructions
Sum total of the powers committed or permitted to Private rule of guidance to the agent
the agent
Relates to the transaction or business with which Refers to the manner or mode of agent's action
the agent is empowered to act
with respect to matters within the permitted scope
of authority
Binds third parties
Does not bind third parties
Authority Instructions
OBLIGATION TO PREFER INTEREST OF PRINCIPAL
General rule: The agent shall be liable for damages if, there being a conflict between his interest and
those of the principal, he should prefer his own [Article 1889].
Exceptions: The agent is not liable for giving preference to his own when:
(1) The principal waives the benefit of this rule, with full knowledge of the facts; or
(2) When the interest of the agent is superior.
An example of the latter is where the agent has\ security interest in goods of the principal in his
possession, he may protect his interest even if in doing so, he disobeys the principal's orders or injures
his interest [De Leon (2010)].
BASIS OF THE RULE

The underlying basis of the rule, which precludes an agent from engaging in self-dealing, is to shut the
door against temptation and keep the agent's eye single to the rights and welfare of the principal.
APPLICATION

(1) A specific application of this subordination of interests is found in Article 1890: If the agent has been
empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been
authorized to lend money at interest, he cannot borrow it without the consent of the principal.
(2) An agent authorized to sell merchandise cannot bind the principal by selling to himself directly or
indirectly, unless the principal consented or ratified the purchase.
OBLIGATION TO ACCOUNT AND TO DELIVER THINGS RECEIVED
Every agent is bound to:
(1) Render an account of his transactions; and
(2) Deliver to the principal whatever he may have received by virtue of the agency, even though it may
not be owing to the principal.
WHAT TO DELIVER

What has to be delivered include all money and property which may have come into his hands or in that
of a sub-agent. This includes gifts from third parties in connection with the agency.
It is immaterial whether such money or property is the result of the performance or violation of the agent's
duty, if it be the fruit of the agency.
LIABILITY FOR CONVERSION

If the agent fails to deliver and instead converts or appropriates for his own use the money or property
belonging to the principal, he is liable for estafa.
EXEMPTING STIPULATION

Every stipulation exempting the agent to render an account shall be void. [Article 1891]
WHEN OBLIGATION NOT APPLICABLE

(1) If the agent or broker acted only as a middleman with the task of merely bringing together the vendor
and the vendee [Domingo v. Domingo (1971)].
(2) If the agent had informed the principal of the gift or bonus or profit he received from the purchaser and
the principal did not object thereto;
(3) When a right of lien exists in favor of the agent.
RESPONSIBILITY FOR ACTS OF SUBSTITUTE
The agent may appoint a substitute if the principal has not prohibited him from doing so.
The agent is responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but:
(a) Without designating the person; and
(b) The person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall be void. [Article 1892]
The principal may bring an action against the substitute with respect to the obligations which the latter
contracted under the substitution [Article 1893].
SUB-AGENCY

A sub-agent or substitute is a person employed or appointed by an agent as his agent, to assist him in the
performance of an act for the principal, which the agent has been empowered to perform. The agent is a
principal with respect to the subagent.
POWER TO APPOINT

General rule: The agent may appoint a sub-agent.

Ratio: The law allows such substitution for reasons of convenience and practicality.
Exceptions:
(1) The appointment is prohibited by the principal [Article 1892];
(2) The work entrusted to the agent requires special knowledge, skill, or competence, unless authorized
to do so by the principal [De Leon (2010)].

RELATIONS AMONG THE PARTIES

(1) When the sub-agent has been employed for own account of the agent, to assist him, the sub-agent is
a stranger to the principal.
(2) When the appointment was authorized by the principal, a fiduciary relationship is created between and
among the principal, agent, and sub-agent, such that neither the agent nor the substitute can be held
personally liable so long as they act within the scope of their authority [Macias & Co. v. Warner, Barnes &
Co. (1922)].
EFFECTS OF SUBSTITUTION

(1) When substitution was prohibited by the principal, appointment by the agent is an act in excess of the
limits of his authority. All acts of the substitute are void [Article 1892].
(2) When substitution was authorized, the agent is only liable when he appointed one who is notoriously
incompetent or insolvent, unless the person was designated by the principal.
(3) When substitution was not authorized, but also not prohibited, the appointment is valid, but the\ agent
is liable for damage caused by the substitution to the principal.
(4) When substitution was authorized and the subagent was designated by the principal, the agent is
released from any liability for the acts of the sub-agent.
RESPONSIBILITY OF TWO OR MORE AGENTS
General rule: The responsibility of two or more agents is not solidary, even though they have been
appointed simultaneously. They are liable jointly.
Exception: They are solidarily liable if solidarity has been expressly stipulated [Article 1894]. If solidarity
has been thus agreed upon, each of the agents is responsible for:
(1) The non-fulfillment of agency, even when the fellow agents acted beyond the scope of their authority;
and
(2) The fault or negligence of his fellow agents, except when the fellow agents acted beyond their
authority.
OBLIGATION FOR SUMS APPLIED TO HIS OWN USE
The agent owes interest:
(1) On the sums applied to his own use from the day on which he did so; and
(2) On the sums which he still owes after the agency is extinguished. [Article 1896]
The liability of the agent for interest for sums converted to his own use is without prejudice to a criminal
action that may be brought against him [De Leon (2010)].
The sums referred to as still owing to the principal after extinguishment of the agency are those which
were not misapplied by the agent, but were found to be owing to the principal after such extinguishment.
OBLIGATIONS TO THIRD PERSONS
LIABILITY OF AGENT FOR OBLIGATIONS CONTRACTED

General rule: The agent who acts as such is not personally liable to the party with whom he contracts.
The principal is responsible for such acts done within the scope of the authority granted to the agent, and
should bear any damage caused to third persons. [Article 1910]
Exceptions: He is personally liable when:
(1) He acts in his own name [Article 1883];
(2) He expressly binds himself; or
(3) He exceeds the limits of his authority without giving such party sufficient notice of his powers.
[Article 1897]
Note: If the agent acts in his own name, he is directly bound in favor of the person with whom he
contracted, as if the transaction were his own, except when the contract involves things belonging to the
principal.
VOID CONTRACTS

The contract entered into by an agent on behalf of the principal shall be void when:

(1) The agent contracts in the name of the principal;

(2) He exceeded the scope of his authority;
(3) The principal does not ratify the contract; and
(4) The party with whom the agent contracted is aware of the limits of the powers granted by the principal.
The agent, however, is liable if he undertook to secure the principal's ratification.
PRESENTATION OF POWER OF ATTORNEY

A third person with whom the agent wishes to contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders
and instructions of the principal do not prejudice third persons who have relied upon the power of attorney
or instructions shown them. [Article 1902]
So far as third persons are concerned, an act is deemed to have been performed within the scope of the
agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has
in fact exceeded the limits of his authority according to an understanding between the principal and the
agent. [Article 1900]
RATIFICATION BY PRINCIPAL

A third person, who contracts with the agent (thereby recognizing the authority of the agent), cannot later
disaffirm his contract based on the fact that the agent has exceeded his powers, if the principal has:
(1) Ratified the acts of the agent; or
(2) Signified his willingness to ratify said acts. [Article 1901]
Thus, the third person can be compelled to abide by the contract in this case.
The ratification has retroactive effect, relating back to the time of the act or contract ratified and is
equivalent to original authority [Board of Liquidators v. Kalaw].
A principal may not accept the benefits of a transaction and repudiate its burdens. Thus, a principal who
seeks to enforce a sale made by the agent cannot ordinarily allege that the agent exceeded his authority.
Before ratification, however, the third person may repudiate the contract.
IGNORANCE OF AGENT

If a duly authorized agent acts in accordance with the orders of the principal, said principal cannot set up
the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware.
[Article 1899]
Thus, if the principal appoints an agent who is ignorant, the fault is his alone. He is bound by the acts of
the agent. The agent is not liable to third persons in this case.
OBLIGATIONS OF COMMISSION AGENT
FACTOR OR COMMISSION AGENT

A factor or commission agent is one whose business is to receive and sell goods for a commission (also
called factorage) and who is entrusted by the principal with the possession of goods to be sold, and
usually selling in his own name. He may act in his own name or in that of the principal.
ORDINARY AGENT
Need not have possession of the goods of the
principal
Acts for and in behalf of the principal

COMMISSION AGENT
Must be in possession

Need not have possession of the goods

Must have possession of the goods

Has no custody of the thing to be disposed of, only

acts as intermediary between seller and buyer

Has custody or possession of the things to be sold

Acts in his own name or that of his principal

Maintains no relations with things to be sold/bought

Maintains relations with the thing, the buyer and the

seller

Co Commission Agent
RESPONSIBILITY FOR GOODS RECEIVED

(1) The commission agent shall be responsible for goods received by him in the terms and conditions and
as described in the consignment, unless upon receiving them he should make a written statement of the
damage and deterioration suffered by the same [Article 1903].
(2) The commission agent who handles goods of the same kind and mark, which belong to different
owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging
to each principal [Article 1904].
SALE OF GOODS ON CREDIT WITHOUT AUTHORITY

General rule: The commission agent cannot sell on credit. Should he do so, the principal may:
(1) Demand from him payment in cash, in which case the commission agent shall be entitled to any
interest or benefit, which may result from such sale [Article 1905]; or
(2) Ratify the sale on credit, in which case the principal will have all the risks and advantages to him [De
Leon (2010)].
Exception: The commission agent can sell on credit with the express or implied consent of the principal.
SALE OF GOODS ON CREDIT WITH AUTHORITY

If the commission agent was authorized to sell on credit and should he so sell on credit, he shall inform
the principal of such sale, with a statement of the names of the buyers.
Should he fail to inform the principal, the sale is deemed to have been made for cash as far as the
principal is concerned. [Article 1906] As such, as to the buyer, the sale may be on credit, but the principal
may demand the payment in cash from the agent.
Should the commission agent receive a guarantee commission (del credere commission) on a sale, in
addition to the ordinary commission, he shall:
(1) Bear the risk of collection; and
(2) Pay the principal the proceeds of the sale on the terms agreed upon with the purchaser.
In case of a sale on credit, the commission agent is obliged to collect the credits of his principal when
they become due and demandable.
General rule: Failing to so collect, the agent shall be liable for damages
Exception: He is not liable if he proves that he exercised due diligence for that purpose.
RESPONSIBILITY FOR FRAUD AND NEGLIGENCE
In the fulfillment of his obligation, the agent is responsible for:
(1) Fraud; and
(2) Negligence
The circumstance that the agency is or is not gratuitous will be considered by the courts in fixing the
liability for negligence only.
The liability may be to the principal or to third persons.
The principal is solidarily liable if quasi-delict was committed by the agent while performing his duties in
furtherance of the principal's business.

Obligations of the principal

OBLIGATIONS, IN GENERAL
In addition to his duties specified under the contract
itself, the principal is under obligation to deal fairly
and in good faith with his agent, who owes the same
to his principal.

OBLIGATION TO COMPLY WITH OBLIGATIONS CONTRACTED

General rule: The principal must comply with all the obligations which the agent may have contracted
within the scope of his authority. As for any obligation where in the agent has exceeded his power, the
principal is not bound.
Exceptions: The principal is:
(1) Bound by the obligation entered into by the agent in excess of his power, when he ratifies it expressly
or tacitly [Article 1910];
(2) Solidarily liable with the agent if the principal allowed the agent to act as though he had full powers
[Article 1911].
Note: If the agent acts in his own name, but the contract involves things belonging to the principal, the
contract must be considered as entered into between the principal and the third person [Sy-Juco and
Viardo v. Sy-Juco (1920)].
RATIFICATION

Ratification is the adoption or affirmance by a person of a prior act which did not bind him, but which was
done or professed to be done on his account, thus giving effect to the acts as if originally authorized.
Aside from the intent to ratify, the following conditions must be fulfilled for ratification to be effective:
(1) The principal must have the capacity and power to ratify;
(2) He must have had knowledge or had reason to know of material or essential facts about the
transaction;
(3) He must ratify the acts entirely;
(4) The act must be capable of ratification; and
(5) The act must be done in behalf of the principal.
[De Leon (2010)]
The effects of ratification are:
(1) With respect to the agent, it relieves him of liability. He may thus recover compensation from the
principal.
(2) With respect to the principal, he assumes responsibility for the unauthorized act as fully as if the agent
had acted under an original authority.
But he is not liable for acts outside the authority affirmed by his ratification.
(3) With respect to third persons, they are bound by the ratification and cannot set up the fact that the
agent has exceeded his powers [Article 1901].
SEPARATE CONTRACTS WITH PRINCIPAL AND AGENT

When two persons contract with regard to the same thing, one of them with the agent and the other with
the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred,
subject to the rules on double sales [Article 1916].
The rules on double sales (Article 1544) provide:
(1) If the same movable property is sold to different persons, ownership is transferred to whoever first
took possession in good faith.
(2) If it be immovable:
(a) Ownership belongs to the person who in good faith first recorded it in the Registry of Property.
(b) If there is no inscription, ownership shall belong to the person who, in good faith was first in
possession; and in the absence of such, to the one who presents the oldest title, provided there is good
faith.
The liability for damages suffered by the third person whose contract must be rejected shall be borne by:
(1) The principal, if the agent acted in good faith; or
(2) The agent, if he acted in bad faith. [Article 1918]
WHEN PRINCIPAL NOT LIABLE, IN SUMMARY

(1) Void or inexistent contracts [Article 1409];

(2) Sale of a piece of land or any interest therein when the authority of the agent is not in writing
[Article 1874];
(3) Acts of the substitute appointed against the prohibition of the principal [Article 1892];
(4) Acts done in excess of the scope of the agent's authority [Articles 1898 and 1910];
(5) When the agent acts in his own name, except when the contract involves things belonging to the
principal [Article 1883];
(6) Unenforceable contracts [Article 1403].
OBLIGATION FOR COMPENSATION OF AGENT
Agency is presumed to be for a compensation, unless there is proof to the contrary [Article 1875].
AMOUNT OF COMPENSATION

The principal must pay the agent the compensation agreed upon, or the reasonable value of the agent's
services if no compensation was specified.
This obligation presupposes that the agent complied with his obligation to the principal.
COMPENSATION OF BROKER

A broker is entitled to the usual commissions whenever he brings to his principal a party who is able and
willing to take the property and enter into a valid contract upon the terms named by the principal, although
the terms may be arranged and the matter negotiated and consummated between the principal and the
purchaser directly.
A broker is never entitled to commission for unsuccessful efforts. The governing rule is that the agent
must prove that he was the procuring cause of the transaction. Otherwise, he is not entitled to the
stipulated broker's commission [Inland Realty v. CA (1997)].
Procuring cause refers to a cause originating a series of events which, without break in their continuity,
result in the accomplishment of the prime objective of the employment of the broker producing a
purchaser ready, willing and able to buy on the owner's terms.
Since the brokers only job is to bring together the parties to a transaction, it follows that if the broker does
not succeed in bringing the mind of the purchaser and the vendor to an agreement with reference to the
terms of a sale, he is not entitled to a commission [Rocha v. Prats (1922)].
If the principal breaks off from negotiations with a buyer brought by the agent in order to deliberately deal
later with the buyer personally, this is evident bad faith. In such case, justice demands compensation for
the agent. [Infante v. Cunanan (1953)]
LIABILITY FOR EXPENSES AND DAMAGES
NECESSARY FUNDS

(1) The principal must advance to the agent, should the latter so request, the sums necessary for the
execution of the agency.
(2) In case the agent already advanced them, the principal must reimburse him therefor:
(a) Even if the business or undertaking was not successful;
(b) Provided that the agent is free from all fault. [Article 1912]
The reimbursement shall include the interest on the sums advanced from the day the advances were
made.
WHEN PRINCIPAL NOT LIABLE FOR EXPENSES

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 were 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:
(a) The expenses would be borne by the agent; or
(b) That the latter would be allowed only a certain sum. [Article 1918]
DAMAGES

The principal must also indemnify the agent for all the damages which the execution of the agency may
have caused the latter, without fault or negligence or his part. [Article 1913]
RIGHT OF RETENTION BY AGENT

The agent may retain in pledge the things which are the object of the agency until the principal effects:
(1) Reimbursement of necessary funds advanced; and
(2) Payment of indemnity for damages. [Article 1914]
This is a case of legal pledge. However, the agent is not entitled to the excess in case the things are sold
to satisfy his claims.
MULTIPLE PRINCIPALS

If there are two or more principals who appointed the agent for a common transaction or undertaking,
they shall be solidarily liable for all the consequences of the agency [Article 1915].
Requisites:
(1) There are two or more principals;
(2) The principals have all concurred in the appointment of the same agent; and
(3) The agent is appointed for a common transaction or undertaking.
LIABILITY FOR QUASI-DELICT BY AGENT

The principal is solidarily liable to third persons for torts of an agent committed:
(1) At the principal's direction; or
(2) In the course and within the scope of the agent's employment.

Extinguishment of agency
MODES OF EXTINGUISHING AGENCY, IN
GENERAL
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. [Article 1919]
The provision enumerates only those which are peculiar to agency and is, therefore, not exclusive.
Agency may also be extinguished by the modes of extinguishment of obligations in general.
The modes of extinguishment may be classified into three:
(1) By agreement (Nos. 5 and 6);
(2) By subsequent acts of the parties:
(a) By the act of both parties or by mutual consent; or
(b) By the unilateral act of one of them (Nos. 1 and 2)
(3) By operation of law (Nos. 3 and 4)
In the absence of anything to show its termination, the agency relation will be presumed to have
continued. The burden of proving termination is on the party asserting it.

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 [Danon v. Brimo (1921)]; 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.
MULTIPLE PRINCIPALS

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]
MANNER OF REVOCATION

Revocation may be express or implied.

There is express revocation when the principal clearly and directly makes a cancellation of the authority
of the agent orally or in writing.
There is implied revocation in the following cases:
(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 requirement
of notice to third persons [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) 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].
There is implied revocation only where the new appointment is incompatible with the previous one.
EFFECT OF REVOCATION IN RELATION TO THIRD PARTIES

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 [Article 1921].
If the agent had general powers, revocation of the agency does not prejudice third persons who acted:
(1) In good faith; and
(2) Without knowledge of the revocation.
Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons.
Article 1922
WITHDRAWAL BY AGENT
The agent may withdraw from the agency by giving due notice to the principal.
LIABILITY FOR DAMAGES

General rule: If the principal should suffer any damage by reason of the withdrawal, the agent must
indemnify him therefor.
Exception: The agent is not liable for damages if he should base his withdrawal upon the impossibility of
continuing the performance of the agency without grave detriment to himself. [Article 1928]

OBLIGATION TO CONTINUE AGENCY

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 [Article 1929].
DEATH, CIVIL INTERDICTION, INSANITY OR NSOLVENCY
DEATH OF PRINCIPAL

General rule: Death extinguishes agency.

Exceptions:
(1) The agency remains in full force and effect even after the death of the principal, if it has been
constituted:
(a) In the common interest of the principal and agent; or
(b) In the interest of a third person who has accepted the stipulation in his favor. [Article 1930]
(2) 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[Article 1931].
(3) The agent must finish business already begun on the death of the principal, should delay entail any
danger [Article 1884].
DEATH OF AGENT

If the agent dies, his heirs must:

(1) Notify the principal thereof; and
(2) In the meantime adopt such measures as the circumstances may demand in the interest of the latter.
[Article 1932]
ACCOMPLISHMENT OF OBJECT OR PURPOSE
Between principal and agent, the fulfillment of the purpose for which agency was created ipso facto
terminates agency, even though it was expressly made irrevocable. If the purpose has not been
accomplished, the agency continues indefinitely for as long as the intent to continue is manifested
through words or actions of the parties.
DISSOLUTION OF FIRM OR CORPORATION
The dissolution of a partnership or corporation which entrusted (principal) or accepted (agent) the agency
extinguishes its juridical existence, except for the purpose of winding up its affairs. It is equivalent to its
death.
EXPIRATION OF TERM
If created for fixed period, expiration of the period extinguishes agency even if the purpose was not
accomplished.
If no time is specified, the courts may fix the period as under the circumstances have been probably
contemplated by the parties [Article 1197]. Otherwise, the agency terminates at the end of a reasonable
period of time. Either party can terminate the relationship at will by giving notice to the other. [De
Leon (2010)]
Period may be implied from terms of agreement, purpose of agency, and the circumstances of the
parties.