Powers of Attorney

The people

About The Principal

Who is the principal under a Power of Attorney

· 9 min read

The Principal Is The Entity That Makes The Power

By properly executing a Power of Attorney, the principal appoints another legal entity as an agent.

It is for the principal's benefit that the tasks authorized to be performed by the agents appointed under the Power of Attorney are performed.

Illustration

Facts

Ron Smith creates a Power of Attorney under which two persons are appointed to perform tasks on his behalf.

Conclusion

Ron Smith would be the principal.

The two persons appointed to perform the tasks on behalf of Ron Smith would be his appointed agents under the Power of Attorney.

The Power of Attorney might for example, also provide for the appointment of one or more successor agents to replace an agent or agents who are ineligible.

The Principal May Be A Commercial Entity

In Florida, §605.0109 provides for an LLC to create a Power of Attorney.

In Texas, a corporation may file a Power of Attorney when dealing with bail bonds in Texas (§1704.211 & §17.07)

In New York §21 deals with Powers of Attorney being used by partnerships in real property transactions.

These are but two examples in the legislation of the Six (6) Greater States referring to the use of Powers of Attorney by commercial entities.

Other considerations in favour of a commercial entity being able to create a Power of Attorney include:-

There are a myriad of sub-species of commercial entities, all of which seem in principle, capable of creating a Power of Attorney for business purposes.

Whether a specific commercial entity may create a Power of Attorney would require consideration of the circumstances with respect to the specific entity and the precise terms of the Power of Attorney, including consideration for example of:-

It Is Possible To Have Multiple Principals

The legislation of the Six (6) Greater States governing Powers of Attorney for persons1 tends to talk of the principal in singular terms and does not specifically address whether a Power of Attorney might be used by a group of principals.

The legislation contains no express prohibition upon the creation of Powers of Attorney by more than one principal and the concept seems accepted in common law.

Creation of a Power of Attorney by more than one principal involves for example, consideration of how things might work where:

The issues associated with creating a single Power of Attorney for more than one principal are sophisticated.

Issues for consideration might include:-

  • providing for a Power of Attorney not to be effective unless and until each principal has executed the Power of Attorney (albeit not in Florida2)
  • providing what is to occur if a principal dies, becomes insolvent or similar

Principal's Obligations

Compensation and Expenses

Five (5) of the Six (6) Greater States have legislation governing the entitlement of agents to remuneration or expenses with respect to Powers of Attorney created by persons.3

In the absence of express terms in a Power of Attorney created for a person:4

In Illinois, the legislation is silent on the question of whether a principal must pay remuneration to agents, leaving the principal to deal with entitlement of an agent to remuneration or expenses, presumably by specifying in their Power of Attorney how they would like things to work.

Being A Prudent Principal Is Encouraged

The concept of the prudent principal has developed because invariably, there are often questions as to what would constitute the best advantage to a principal.

No reference is made to the term “prudent principal” in the legislation of the Six (6) Greater States.

There is reference to the concept of the prudent agent in the legislation of California and New York.

Principal's Liabilities

Compensation and Expenses

As discussed under the heading Compensation and Expenses above, an Agent May Be Entitled To Remuneration Or Expenses.

SOME HANDY REFERENCES

California

In so far as the legislation governing Powers of Attorney for persons7 is concerned, a Power of Attorney §4022 deals with execution of a Power of Attorney by a person.

§4022 states:

"A natural person having the capacity to contract may execute a power of attorney."

There are good reasons to believe a commercial entity may create a Power of Attorney.

New York

In so far as the legislation governing Powers of Attorney for persons8 is concerned, the term principal is defined as (§5-1501):-

"an individual who is eighteen years of age or older, acting for himself or herself and not as a fiduciary or as an official of any legal, governmental or commercial entity, who executes a power of attorney."

There are good reasons to believe a commercial entity may create a Power of Attorney.

Texas

Views may differ between lawyers in Texas about what sorts of legal entities might create a Power of Attorney in Texas.

Non-durable Power of Attorney

Unlike the other states (i.e. New York, California, Florida, Pennsylvania and Illinois) in Texas, legislation does not deal with the operation of non-durable Power of Attorney for persons.

Power of Attorney for Commercial Entity

In Texas:

  • A Power of Attorney may be created by a corporation or trustee of a trust (as recognized for example, in §1704.211, Art. 17.07 and §113.018 respectively) and this entitlement extends to include various sub-species of these entities
  • There is judicial support for the entitlement of commercial entities to create a Power of Attorney: (a) in Texas Bankers Association v Association of Community Organizations for Reform Now (ACORN) (App 3 Dist. 2010) 303 S.W.3d 404 the Court recognized that in Texas, a Power of Attorney may be used in business transactions; and (b) the Courts of Texas have at various times considered cases in which Powers of Attorney were created by different legal entities, for example: associations (see Howard Construction Company, Inc v Texas Association of Women’s Clubs (No. 07-15-00361-CV, Tex. App. -Amarillo, August 15, 2017); and trust companies (Landamerica Commonwealth Title Company et al v Michael Wido et al, No DC-09-17536, Tex. App. – Dallas, October 29, 2015)

As to whether a minor might create a non-durable Power of Attorney, lawyers opinions may vary but it seems there is a reasonable argument that a Power of Attorney cannot be created by a minor, unless the individual falls within one of the two exceptions under §22.022 to the general rule that persons under eighteen (18) years of age are minors (§22.016), being:-

  • where a person under eighteen (18) years of age is or has been married
  • has had their minority status ended by a Court

Durable Power of Attorney

A durable Power of Attorney may be created by an adult person who is not bankrupt (§751.002).

A durable Power of Attorney cannot be created by a partnership, corporation, association, joint venture, bank or other legal entity that is not a person, other than perhaps the trustee of a trust who is an individual, in particular because: (a) by definition, a durable Power of Attorney is created by an adult person; and (b) the inherent purpose of a durable Power of Attorney is to permit an agent or agents to exercise authority in circumstances where the principal lacks capacity, being a concept only applicable to persons; and (c) given that entities other than a person cannot lack capacity in the requisite sense, any entity other than a person would be at liberty to create a non-durable Power of Attorney.

It is questionable whether a person as a trustee may use a Power of Attorney to delegate their powers as a trustee during any period that they lack capacity.

  • it seems inconsistent in circumstances where the legislation permitting durable Power of Attorney only applies to persons
  • and yet, §113.018 does recognize the right of a trust to use a Power of Attorney appoint an agent for certain purposes, not said to be the only purposes

If for example, §113.018 and other legal principles apply to mean that the purposes specified in §113.018 are an exhaustive list, the capacity of a person as a trustee to delegate tasks to an agent under a durable Power of Attorney may turn on considerations including the purpose of the durable Power of Attorney.

As to whether a minor might create a durable Power of Attorney:-

  • on one view, the definition of a principal in §161.151(1) as an adult person prevents a minor creating a durable Power of Attorney
  • on the other hand, it may be that the words “adult person” in §751.002 are to be read include a person under the age of 18 years of age who has had the disabilities of minority removed (see above) which for example, would be consistent with the approach applicable to non-durable Powers of Attorney and the entitlement of a person with the disabilities of minority removed to execute a Medical Power of Attorney

Florida

In so far as the legislation governing Powers of Attorney for persons9 is concerned, the term principal is defined as (§709.2102):-

"..an individual who grants authority to an agent in a Power of Attorney".

There are good reasons to believe a commercial entity may create a Power of Attorney.

Illinois

In so far as the legislation governing Powers of Attorney for persons10 is concerned, the term principal is defined as (§2-3):-

"..an individual (including, without limitation, an individual acting as trustee, representative or other fiduciary) who signs a power of attorney or other instrument of agency granting powers to an agent."

There are good reasons to believe a commercial entity may create a Power of Attorney.

In Illinois, only one agent may be appointed if a government form is used to create a Power of Attorney:§2-10.5

Pennsylvania

In so far as the legislation governing Powers of Attorney for persons11 is concerned, the term principal is not defined, although the ambit of the legislation may be limited to persons, similar to the remainder of the Six (6) Greater States.

There are good reasons to believe a commercial entity may create a Power of Attorney.

  1. Ibid. ↩︎

  2. See the heading There Are Special Considerations In Florida ↩︎

  3. Being not a Power of Attorney excluded from the ambit of the legislation - click here to read more. ↩︎

  4. Being not a Power of Attorney excluded from the ambit of the legislation - click here to read more. ↩︎

  5. Click here for more information. ↩︎

  6. In New York, an agent is denied remuneration unless the Power of Attorney expressly provides that the agent is entitled to remuneration (see §5-1506). ↩︎

  7. Ibid. ↩︎

  8. Ibid. ↩︎

  9. Ibid. ↩︎

  10. Ibid. ↩︎

  11. Ibid. ↩︎