Powers of Attorney

The basics

Nature of A Power of Attorney

What is the nature of a Power of Attorney?

· 6 min read

This page examines the nature of a Power of Attorney and how conflicts between the terms of a Power of Attorney and the law are resolved.

This page discusses how a Power of Attorney differs from an agency agreement and how an agent differs from a trustee.

The contents of this page are focused upon Powers of Attorney for commercial purposes.

What Is The Nature Of A Power of Attorney?

A Power of Attorney is the sum of all its contents, read together in conjunction with the general law.

Unless a contrary intention is evidenced by the terms of the Power of Attorney or perhaps a separate, qualifiying agreement:-

  • the tasks specified in a Power of Attorney may be attended to by the agent in the absence of the principal
  • the delegation is not exclusive as against the principal (i.e. the principal may still perform the relevant tasks themselves)
  • an agent is not permitted to benefit from their appointment
  • an agent must perform the relevant tasks for the exclusive benefit of the principal

Any qualification of these kinds of principles must be recorded in express terms, consistent with the four corners rule.

Law Versus Express Terms

Where any express terms (i.e. actual words) in a Power of Attorney are contrary to the general law:-

  • in some instances, the general law may submit to the express terms in the Power of Attorney
  • in other instances, seeking to interfere with the general law through the terms of a Power of Attorney may invalidate the whole or part of a Power of Attorney
  • rights flowing from the inconsistency may be automatic or exercisable at the discretion of a particular party1

The best way to avoid these issues is to ensure that the terms of a Power of Attorney are consistent with the general law.

How Does a Power of Attorney Differ From An Agency Agreement?

Powers of Attorney are a type of agency, except to the extent that the general law applicable to Powers of Attorney provides its own rules.2

Unlike agency agreements, Powers of Attorney are:-

  • specifically regulated by legislation that varies from state to state3
  • able to be cast by a person in terms that mean that the Power of Attorney continues to be effective even if the principal becomes unable to make decisions for themselves4
  • able to be cast using a 'statutory design' (i.e. a government form) in many states5

An agency agreement has none of these features.

How Does An Agent Under a Power of Attorney Differ From A Trustee?

An agent appointed under a Power of Attorney and the trustee of a trust are invariably both fiduciaries.

However:-

  • an agent rarely acquiring legal title, unlike the trustee of a trust who typically holds legal title to trust property
  • an agent is authorized to use their signature to transact in the name of the principal, whereas a trustee is typically the transacting party when performing trust transactions
  • an agent typically does not have a positive duty to act, unlike a trustee6

Next Page

  • The next page examines the use of Powers of Attorney by commercial entities and persons in California, including purposes for using durable and non-durable Powers of Attorney.

The headings on the next page are:

  1. For example, a Power of Attorney may be voidable, as discussed in articles like Does The Agency Die When The Principal Becomes Mentally Incapacitated? Alfred Mukatis (1983) and Incompetent Principals, Competent Third Parties, and the Law of Agency, Alexander Meiklejohn (1986). ↩︎

  2. This was recognized for example, in California in the 1994 California Law Revision Commission Report which led to enactment of Division 4.5 of the Probate Code stated "..Powers of Attorney are a type of agency, except to the extent that the Power of Attorney Law provides its own rules.."and went on to observe that "§4051 .. makes clear that the general agency statutes and the common law of agency apply to Powers of Attorney under this division, except where this division provides a specific rule." ↩︎

  3. As an example of circumstances where a Power of Attorney is regulated by legislation in circumstances where no comparably equivalent legislation governs agency agreements, in California §4231.5 (cited under the heading Agent Cannot Benefit) renders an agent liable for certain damages, there being no equivalent legislative provision applicable in respect of the breach of an agency agreement. ↩︎

  4. See durable Powers of Attorney. ↩︎

  5. See for example, the Uniform Statutory Form Power of Attorney (i.e. government form) in California which is found in §4401. ↩︎

  6. For example, the 1994 Californian Law Reform Commission report referred to the positive duty of a trustee in these terms: "Under the Trust Law, if a trustee accepts the trust, the trustee becomes subject to all applicable duties to administer the trust, cannot later refuse to act, and may resign only by following the procedures prescribed in the statute or the trust instrument. A trustee accepts by signing the trust instrument or knowingly exercising powers under the trust, except in emergency situations. Once the trustee has accepted the trust, the trustee has a duty to administer the trust, which does not end until the trustee is removed or allowed to resign." By contrast, §4230 under the Californian Probate Code states “(a) Except as provided in subdivisions (b) and (c), a person who is designated as an.. [agent] has no duty to exercise the authority granted in the Power of Attorney and is not subject to the other duties of an.. [agent], regardless of whether the principal has become incapacitated, is missing, or is otherwise unable to act.." Subdivision (b) states: "Acting for the principal in one or more transactions does not obligate an.. [agent] to act for the principal in a subsequent transaction, but the.. [agent] has a duty to complete a transaction that the.. [agent] has commenced.." and subdivision (c) states: "If an.. [agent] has expressly agreed in writing to act for the principal, the.. [agent] has a duty to act pursuant to the terms of the agreement.." Beyond these provisions, the mandatory notice for durable Powers of Attorney in §4128 contains the words: "Your agent (attorney-in-fact) has no duty to act unless you and your agent agree otherwise in writing" and §4266 provides: "....the grant of authority to an.. [agent], whether by the Power of Attorney, by statute, or by the court, does not in itself require or permit the exercise of the power.  The exercise of authority by an.. [agent] is subject to the.. [agent's] fiduciary duties.." ↩︎