As our daily lives busier and more complex, we tend to depend on other people for several tasks. In the contemporary world, this has become a norm. We depend on other people to act on our behalf, whether professionally or otherwise. In the legal world, acting on behalf of someone else, or authorising someone to act on our behalf calls for regulation, which is done through written contracts with terms and conditions laid out in case of any discrepancy. One such authority is the document of “power of attorney”, which authorises a person to decide the legal affairs of another on that person’s behalf.
In India, even though getting a power of attorney registered is not mandatory, it is preferable to have one registered because whatever agreement exists between the principal and the agent will be further authenticated and will prevent any irregularities that may arise in future.
Power of Attorney
As per Black’s Law Dictionary, a power of attorney is an instrument by which a person gets authorised to act as an agent of the person granting such power of attorney. Agency is not new in law; attorneys and general people are authorised to act as agents on behalf of someone, who is the principal. Power of attorney is also defined under several Acts, such as the Indian Stamps Act, 1899, and the Bombay Stamps Act, 1958. The Powers of Attorney Act, 1882, does not provide comprehensive details regarding agency; it only deals with the document briefly. The Indian Contract Act, 1872, deals with agency extensively, which further defines the parameters of a power of attorney.
Usually, a power of attorney deals with finances, medical care, or property. An agent can have wide powers in this regard, or limited ones, depending upon the agreement and the principal. The main aim of a power of attorney is to be able to regulate affairs of the principal if the principal becomes sick, disabled, or dies without having his affairs managed.
The agent, also known as the attorney-in-fact, is chosen by the principal as someone who is trustworthy enough to manage the legal affairs of the principal, since the tasks may require signatures and verification of the principal, which is to be carried out by the agent. A power of attorney is signed by both the parties, the principal and the agent, and a third party, usually a lawyer, is present at the time of execution of the same. Documents required by the agent in order to carry out the tasks are obtained from the lawyer of the principal. This also implies that a power of attorney need not be a lawyer always. He can be any person as long as he is chosen by the principal.
Types of Powers of Attorney
A power of attorney is used for different purposes; thus, it is of different kinds. A durable power of attorney is one which is created during the capacity of the principal and continues even after the principal becomes disabled or incapacitated. It, however, ends in case the principal dies. A springing power of attorney, on the other hand, comes into force only when the principal becomes incapacitated.
A Health Care Power of Attorney is specifically for health care, for the agent to act on behalf of the principal in case the principal requires prolonged medical attention, or goes into a coma. This kind of power of attorney is also called a health care proxy, and comes into effect if there is an unfortunate medical accident. It confers upon the agent the power to take health-related decisions for the principal when the principal himself can no longer do so.
A Financial Power of Attorney gives the agent the authority to manage financial matters of the principal, such as sign cheques, file tax returns, manage emails and bank accounts, etc. The accountability in this kind of power of attorney is major, and the agent is required to take all decisions as per the principal’s wishes. A financial power of attorney also allows the agent to withdraw or deposit moneys, and alter beneficiaries. Financial Powers of Attorney are further fragmented into General, Limited, and Durable Powers of Attorney. A General Financial Power of Attorney charges the agent with all the general financial tasks that the principal may otherwise perform on his own, and that which are allowed by the government. A Limited Financial Power of Attorney grants authority in limited matters or under specific circumstances, or during a specified period. A Durable Financial Power of Attorney holds even when the principal becomes incapacitated or unable to make decisions on his own.
General Principles regarding Power of Attorney
While determining a power of attorney, it should be kept in mind that a power of attorney should always be strictly construed. In case the power of attorney is loosely construed, it may lead to excessive powers being conferred upon the agent, which may be undesirable. It is preferable that the principal carry out his affairs on his own, rather than conferring more than the required amount of authority on the agent. Similarly, an agent cannot bind the principal for an act done by him which falls out of the extent to which the agent is empowered. For example, power to dispose off property of the principal does not mean power to mortgage property, or power to deal with immovable property does mot mean power to deal with movable property as well.
A fraudulent act committed by the agent will not hold the principal liable.
How To Cancel A Power Of Attorney?
A power of attorney is granted according to the principal, and ensues for as long as the principal wants. However, under several circumstances, a power of authority may be canceled or revoked, and such revocation will free the agent from any responsibility. The revocation takes place when the power of attorney is expressly revoked, or if the time period within which it was to be in force comes to an end, or if the power of attorney is not durable and the principal becomes mentally unstable.
A power of attorney is revoked when the principal himself ends it. This may be due to several reasons, or simply because the principal wants to switch the agent. The main person in the transaction of agency is the principal, therefore, his decision is foremost.
If the principal dies, or becomes incapacitated, or bankrupt, the power of attorney may be revoked. In case of incapacitation, a durable power of attorney or a health care power of attorney may still function, but any other kind of power of attorney will end. The reason behind revocation here is that it was the principal who had the authority to confer power upon the agent to act on his behalf, and since the principal does not exist, or is incapable of making sound decisions, there can be no agency. In case a principal goes bankrupt, there will be no affairs to manage, and no money required for the same.
A power of attorney may come into existence because the principal authorised the agent to perform a specific task, and after the completion of that task, the agent is no longer required. In such a situation too, power of attorney will be revoked.
When both the principal and the agent agree upon the revocation of the power of attorney, be it because of any reason, then too the power of attorney will cease to exist.
An agent is also guaranteed certain rights while acting in the capacity of an agent. If he so feels, he can renounce the right to work as an agent, and it would lead to the revocation of the power of attorney.
Where a court of law invalidates a power of attorney, it will cease to exist. This may happen because the document was not legal, or went against the existing provisions of the law of the country.
If a married couple is in the capacity of a principal and agent, then divorce between the couple will defeat the authorization that the principal would have conferred over the agent.
A power of attorney is essentially a document that secures your future by putting someone in your place when you lose the capability to take rational decisions. It may also exist in order to have someone manage your affairs if you meet with an unforeseeable situation. But, as stated earlier, a power of attorney brings with itself great responsibility on part of the agent and blind faith on part of the principal. In today’s world where a person could go to lengths just to gain monetary benefit of some kind, it is vital that an agent be someone who is responsible, diligent, and honest enough to be trusted with private as well as professional affairs. It is also important that a power of attorney be created with free consent and mental competence, otherwise it will be defeated in a court of law.
Frequently Asked Questions (FAQs)
What does “having a power of attorney” imply?
Having a power of attorney means that a person has the permission to act on someone else’s behalf legally, and which allows them to take financial, legal, and other decisions on behalf of that person.
How can a power of attorney be canceled or revoked?
A power of attorney can be revoked by expressly stating the same. Revocation takes place when the power of attorney is expressly revoked, or if the time period within which it was to be in force comes to an end, or if the power of attorney is not durable and the principal becomes mentally unstable. Such revocation will free the agent from any responsibility.
What is the scope of an agent under a power of attorney?
An agent is authorised to do only that which is mentioned in the agreement between him and his principal. Any fraudulent act, or an act which exceeds the power conferred upon the agent will not hold the principal liable.