What are the Obligations of a Power of Attorney

Power of Attorney –

A potent document which possesses the authority to delegate all the general or any specific decision-making power of an individual to another person. The person granting such authorization is known as the Principal, whereas the person holding the delegated power is known as an Agent.

Power of Attorney is not a contract per se; however, it does resemble one. The sole factor that distinguishes the power of attorney form that of a contract is lack of any consideration. In the case of State of Rajasthan V. Basant Nahata[1], the court held: “A grant of power of attorney is essentially governed by Chapter X of the Contract Act. By reason of a deed of power of attorney, an agent is formally appointed to act for the principal in one transaction or in a series of transactions or to manage the affairs of the principal. A deed of power of attorney is executed in favour of the agent who derives a right to use his name and all acts, deeds, and things are done by him, and subject to the limitations contained in the said deed, the same shall be read as if done by the grantor of power (donor). A power of attorney is, as is well known, a document of convenience.”

This position of an agent is that of a fiduciary, which is the highest known legal duty. Since such a duty entails significant aspects of the principal’s life, the agent must act in good faith, should carry out his duties, and exercise the powers as an agent diligently. The principal puts confidence upon the agent in respect of his finances, legal matters, medical, proprietary, etc., The agent is anticipated to discharge the expectations of the principal in the best manner possible. He should act in the same manner the principal would have acted, had the decisions been taken by him. “Execution of a Power of Attorney in terms of the provisions of the Contract Act as also the Power of Attorney Act is viable. Except in cases where power of attorney is coupled with an interest, it is revocable. The donee (agent) cannot use the power of attorney to his benefit. He acts in the fiduciary capacity. Any act of treachery or infidelity is a matter between the donor and done.”[2]

Fiduciary duty to the principal is a very primary duty which is expected from all the agents appointed under various types of Power of Attorney. Types of duties on the basis of classification of Power of Attorney are:

Duties under a General Power of Attorney –

Agents under this category have far-reaching responsibilities. They range from managing the financial accounts of the principal to being in charge of paying principal’s bills or debts, he has a responsibility to sell any real estate property of the principal if the situation demands so, keeping accounts of all the transactions involving the property, determining whether the person has a will and if so, what the contents are, etc., The agent should keep a clear record of what he does with the principal’s assets, because the principal may demand an accounting at any time.[3]  For example, “care must be taken while selecting an agent, as some of them use their authorities to steal the assets of the vulnerable individuals such as the elderly (see elder abuse case).”[4]  The powers of the agent are put in the language in the power of attorney so as to provide guidelines to the agent. This provides a reasonable restriction on the extensive powers of the agent, to which he is supposed to confirm. Each of the powers granted must be clear, even if the principal grants the agent “general power of attorney”. The principal cannot grant sweeping authority such as, “I delegate all things having to do with my life.”

Duties under a Specific/Limited Power of Attorney –

Agents under this category are appointed for specific events. For example, the principal has to go abroad for a couple of months and has appointed an agent to manage his finances and property matters for the time period of his absence. Such a power of attorney is similar to that of a general power of attorney in respect of duties of the agent towards the principal, except the time period is short and specified in the limited power of attorney. The agent, like in general power of attorney, should conform to the terms of the power of attorney.

Convention power of attorney terminates with the incapacitation or death of the principal’s life or with the purpose of the deed being achieved. However, a Durable Power of Attorney continues even after such incapacitation. Thus, paving a way for the third category of power of attorney, i.e., Durable Power of Attorney.

Durable Power of Attorney –

The agent remains in control of certain legal property or financial matters specifically spelled out in the agreement even after the principal’s incapacitation (until the principal’s death)[5]. The agent is trusted to act on behalf of the principal in his most vulnerable times. The agent is expected to act to the best interests of the principal. He has to perform his duties in a manner that does not cause conflict between his and the principal’s interests. The agent must put himself in the shoes of the principal and then take decisions regarding different matters. He has duties in respect of making expenditures from the principal’s property, which is necessary for his/her support, education, and care and for that of any legal dependants.

A durable power of attorney can pay the medical bills of the principal but he/she is not entitled to take any healthcare decisions relating to the principal’s health. If the principal wants the agent to take such health-related decisions, he needs to sign a Durable Power of Attorney for healthcare or a Healthcare Power of Attorney (healthcare proxy). This brings us to the last category of power of attorney, i.e., Healthcare Power of Attorney.

Healthcare Power of Attorney –

Healthcare is a sensitive subject in a person’s life. By appointing an agent under the said power of attorney, the principal is directly putting his life into the hands of another person. For example, whether to allow visitors to meet the patient or not, making decisions as to taking off the life-supporting system, etc. In such situations, the decisions of the agent might cause conflict within the family of the principal. He should consult, from time to time, with supportive family members and friends. Therefore, it is suggested that there should be transparency and communication between the agent and the members of the family. He should provide a paper trail of all the transactions relating to the principal to provide clarity. Thus, the agent being the handler of the crucial life of the principal should take into consideration the feelings, opinions, and suggestions of the family members of the principal as well.

The above said were the general duties that an agent should abide by when in the position of a fiduciary. There are certain other duties which are made mandatory by the law:

  • To act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and otherwise in the principal’s best interest.
  • To act in good faith (honesty).
  • To act within the scope of authority granted in power of attorney.

Certain duties provided under the Contract Act, 1872:

  • Section 211 – To conduct the business of the principal according to the directions given by him, or, in the absence of such directions, according to the custom which prevails in doing business of the same kind.
  • Section 212 – To conduct the business of the agency with as much skill as is generally possessed by persons engaged in a similar business.
  • Section 213 – Duty to render proper accounts on demand.
  • Section 214 – Duty to communicate with the principal.
  • Section 215 – Duty to not deal on his own account.
  • Section 216 – Duty to not make secret profits.
  • Section 218 – Duty to pay sums received for the principal.

The agent is under the duty to not disclose and maintain the secrecy of the business or agency, thus not revealing the confidential matters. Several sources of law govern the conduct of an agent under a power of attorney. For example, Virginia has adopted the Uniform Power of Attorney Act with some changes made from the Uniform Act. In addition to the above, common law principles also govern an agent’s duties.

[1] State of Rajasthan V. Basant Nahata, (2005) 12 S.C.C. 77.

[2] Ibid.

[3] http://kyjustice.org/node/579

[4] Hughes, Michele. “Remedying Financial Abuse by Agents Under a Power of Attorney for Finances” Marquette Elder’s Advisor. 2(4): 39-48.

[5] Clark, Elias; et al. (2007). Gratuitous Transfers: Wills, Intestate Succession, Trusts, Gifts, Future Interests, and Estate and Gift Taxation. St. Paul, MN: Thomson/West. p. 310. ISBN 978-0-314-1604-9

This article is authored by Niyati Upadhyay, 4th year, B.A. LL.B student at Allahabad University.

Also Read – What Actually The Power Of Attorney (POA) Is?

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