Modes of Extinguishment of Agency

Modes of Extinguishment of Agency Art. 1919 Agency is extinguished by: 1. 2. 3. 4. 5. 6.

Revocation Withdrawal of the agent Death, civil interdiction, insanity, or insolvency of the principal or agent Dissolution of the firm or corporation acting as the agent/principal Accomplishment of the object or purpose of the agency Expiration of the period for which agency was constituted

Mnemonics: W-A-R-D-E-D (Withdrawal, Accomplishment, Revocation, Dissolution, Expiration, Death) Modes of extinguishment 1. By agreement -5 and 6 2. By subsequent acts of parties (may be by act of both parties/mutual consent, or by unilateral act of one of them) -1 and 2 3. By operation of law -3 and 4 Continuance and capacity of principal and agent    

Agency requires existence and capacity of both parties Death, civil interdiction, insanity, or insolvency of either party terminates agency Civil interdiction –deprives offender of the right to manage or dispose of his property during the period of sentence Dissolution of firm extinguishes its juridical existence; equivalent to death

Modes provided not exclusive   

List not exclusive; provides only those causes peculiar to the agency There are other causes E.g. novation, loss of the thing, change in laws affecting the object of the agency, etc.

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. Agency generally revocable at will by principal   

Agency may be terminated by subsequent acts parties If done by principal, it is called revocation; when done by agent, renunciation Principal may revoke agency at will (subject to exceptions in Art. 1927)

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Authority of agent emanates from the principal, enough that principal should wish to terminate the agency Agency is a relationship based on confidence between parties; agency should cease should confidence disappear Revocation by will proper whether gratuitous or with compensation

Liability of principal for damage caused by revocation    

Principal may have absolute power to revoke He may still be liable for damages wherein he does not have the right to do so, and he chooses to revoke agency Power to revoke different from his right to revoke Action of indemnity derived not from law, but from the contract of the parties

Kinds of revocation    

May be express or implied Implied –e.g. when principal appoints a new agent for the same business or transaction; when principal directly manages the business entrusted to agent If authority of agent is in writing, principal may compel him to return the document evidencing the agency In order to prevent agent from using the POA and avoid liability to third persons who may subsequently deal with agent on the faith of the instrument

Art. 1921 If 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. Art. 1922 If 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 revocation in a newspaper of general circulation is sufficient warning to third persons. Effect of revocation in relation to third persons 1. Agency to contract with specific persons  Notice should be given to such third persons; notice should be personal  Failure to give notice will not prejudice such third persons  They have right to presume that the agency continues to exist in the absence of notification 2. Agency to contract with general public  Advertising the revocation in a newspaper of general circulation is sufficient notice to third persons  True whether or not such third persons have actually read the newspaper or not

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Notice need not be personal See example page 327

Art. 1923 The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice was given to the former agency, without prejudice to the provisions of the two preceding articles. Revocation by appointment of new agent    

Implied revocation (provided new agency is incompatible with previous agency) Revocation does not become effective until appointment of new agent is communicated to the old agent Rights of third persons who acted in good faith and without knowledge of the revocation will not be prejudiced See example page 328-329

Art. 1924 Agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. Revocation by direct management of business by principal himself   

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Implied revocation (unless desire of principal is for him to manage business together with the agent) If not, there would no longer be any basis for representation If purpose of directly dealing with third persons is to avoid payment of agent’s commission, revocation deemed made in bad faith; principal still liable to pay agent’s commission See example page 329-330

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. Revocation by one of two or more principals   

Provided agency was formed for a common transaction, principals are solidarily liable to the agent for all consequences of the agency Any of the principals may revoke the agency without the consent of the others In solidary obligation, act by one is an act by all

Art. 1926 A general power of attorney is revoked by a special one grated to another agent, as regards the special matter involved in the latter. Partial revocation of general power    

Two agents are involved One is granted general powers, while another is subsequently granted special powers Specific power naturally prevails over a general power See example page 330-331

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. When agency irrevocable 

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Exception to general rule of absolute power of principal to revoke 1. Agency created not only for interest of the principal, but also for interest of third persons 2. Agency created for mutual interest of both principal and agent See example page 331-332

Agency coupled with interest      

Not revocable by the sole will of the principal Revocable when interest ceases To be irrevocable, interest of the agent shall be in the subject matter of the power conferred Not merely an interest in the exercise of the power It entitles him to compensation therefor See example page 332-333

Art. 1928 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. Right of agent to withdraw  

Agent may withdraw from the agency at any time Regardless of whether the agency was gratuitous or with compensation

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Based on constitutional prohibition against involuntary servitude 1. Without cause  Agent has the duty to notify the principal of his withdrawal  If withdrawal without just cause, agent should indemnify the principal for damages suffered by reason of the withdrawal 2. With just cause  If with valid reason (e.g. based on impossibility of continuing with the agency without grave detriment to himself)  Or due to fortuitous events  Agent cannot be held liable  He is not required to sacrifice his own interest just to serve the principal

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 necessary steps to meet the situation. Obligation of agent to continue to act after withdrawal  

Must continue to act as agent until principal has had reasonable opportunity to take necessary steps to remedy the situation Purpose of law is to prevent damage to principal

Art. 1930 The agency shall remain in 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. When death of principal does not terminate agency 1. Agency constituted in the common interest of the principal and agent 2. Constituted in the interest of a third person who has accepted the stipulation in his favor. See example page 335 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. Validity of acts of agent after death of principal  

Third persons not prejudiced where agent acted without knowledge of the death of the principal (or of any other cause which extinguishes the agency) Requires the agent to act in good faith (as well as the third person)

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Agent required to finish the business already begun should delay entail any danger See example page 336

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. Duty of agent’s heirs to protect interest of principal     

If agent dies, agency also extinguished Law imposes upon his heirs the obligation to notify the principal of his death Also obliged to adopt such measures as the circumstances may demand for the interest of the principal Agency by operation of law Heirs can continue agency only temporarily, since essence of agency is personal confidence