Under Articles 1868 and 1919 of the New Civil Code, "[b]y the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter," and as a general rule, the death of the principal extinguishes the contract of agency.
Nevertheless, the transactions made by an agent after the death of the principal may be considered valid subject to certain conditions set forth in Article 1931 of the said Code.
Article 1931 of the same Code provides that "[a]nything 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 was discussed in one case decided by the Supreme Court, to wit:
"Under this provision, an act done by the agent after the death of his principal is valid and effective only under two conditions, viz:
(1) that the agent acted without knowledge of the death of the principal and
(2) that the third person who contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said agent.
These two requisites must concur: the absence of one will render the act of the agent invalid and unenforceable."
Indeed, "being the general rule it follows a fortiori that any act of an agent after the death of his principal is void ab initio unless the same falls under the exceptions provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an exception to the general rule, is to be strictly construed."
Source: Manila Times