by Law Corner
Table of Contents hide
1) INTRODUCTION:
2) WHAT IS POWER OF ATTORNEY
2.1) 1. General Power of Attorney
2.2) 2. Limited Power of Attorney
2.3) 3. Durable Power of Attorney
2.4) 4. Health Care and Medical Power of Attorney
2.5) 1. When Principal challenges POA or Agent’s authority
2.6) 2. When Principal is mentally incompetent
2.7) 3. When Agent abuses his authority
3) CONCLUDING REMARK:
INTRODUCTION:
Trust, Good Faith, and Principal’s best interest are some key factors that should be kept in mind while choosing an Agent for your Power of Attorney. The Principal can make anyone be an agent like a firm, organization, friends, relatives, spouse, etc but the agent should be one who stands on the relationship of fiduciary or trust. Attorney in fact will not take legal actions on behalf of Principal unless and until it would be with Power of Attorney i.e. legal document needed. Both the Donor and the Attorney maintain the relationship of Principal-agent between them.
WHAT IS POWER OF ATTORNEY
Nowadays, Agreement and Contracts become an important requirement that everyone wants to make so that it would not cause any damage to them in the upcoming future. In simple terms, the word ‘attorney’ means a person who is appointed to acts on behalf of someone else for business and legal matters. The word ‘Power of Attorney’ (POA) is a legal agreement in which the person (the Principal) gives power to another person (agent) to act on his behalf. The Indian Contract Act, 1872, Section 182 defines Agent and Principal as the person for whom such act is done is called “Principal” and for which such person is appointed to do an act to deal with the third party is called “Agent”. The person who may employ or itself may be an agent should be of the Majority age and of sound mind. Not fulfillment of these terms will lead to termination of the Agency.
Before granting POA to Agent, the Principal should need to keep in mind that type of Powers he would give to him whether it is of limited or general power. Sometimes POA was given when the Principal became mentally incompetent to decide his matters. There are 4 sorts of Power of Attorney-
1. General Power of Attorney
In this type of Attorney, the principal provides wide powers to an agent or Attorney-in-fact to act on his behalf. The more general powers and affairs have to be handled by agents and it includes a variety of tasks like entering into contracts, sells and purchase of estates, and handling business matters, etc.
2. Limited Power of Attorney
This is also known as ‘specific power of attorney’ which restricts the agent within a particular scope of work. In this type of Attorney, the Agent would only have limited power to do a specific act whatever their principal assigned. After the completion of an act the attorney’s power comes to an end.
3. Durable Power of Attorney
This type of Attorney is used when there may be a possibility of mental incompetence due to injury or illness in the near future. The Durable power of attorney will remain valid if the principal became mentally ill and executed until his death.
4. Health Care and Medical Power of Attorney
In this type of Attorney whenever there are medical care and treatment, the agent was authorized to make decisions on his behalf. Sometimes unable to communicate decisions due to grave health issues, your trustworthy agent would carry out your decision.
The Supreme Court said in the case of Kasthuri Radhakrishnan and others vs. M. Chinnaiyan, that all the laws relating to Power of Attorney will be governed by The Powers of Attorney Act, 1882. The power of attorney is a legal binding document but it can be revoked or challenge by someone until you are competent to alter or change.
Does a question arise that who can challenge a Power of Attorney? The Power of Attorney (POA) can be challenged either by the Principal or Third Person. It can be done –
1. When Principal challenges POA or Agent’s authority
The Principal may revoke Power of Attorney if he found an agent in some fraud or misconducting the business and legal activities. The competence of contracting agreement is necessary for both of them. And if the documents which bind agent and principal are not met then it can be challenged in court. A principal can challenge the Power of Attorney if he thinks that it was granted to the wrong person or the agent did not have adequate capacity to handle POA. If the agent found committed fraud or misrepresentation during the course of an agency that does not fall within the authority provided, it does not affect the principals.
2. When Principal is mentally incompetent
Mental incompetence cannot make the agency revoked but make only non- enforceable from the principal. An incompetent Principal cannot terminate the Agency or POA but their loved or near one’s can do that on his behalf. The Power of Attorney may be challenged by the Third Person on the contention of the Principal’s mental illness if there was not a Durable Power of Attorney. There should be a medical practitioner to prove the Principal’s incompetence to act in court.
3. When Agent abuses his authority
If the donee or the agent exercises excessive power which was not authorized to them will not be binding on Principal. The principal can challenge or revoke the POA based on Breach of Trust and that caused financial damage to the Principal. An agent can exercise only that power of subject matter which was conferred on them. Failing to or misusing the powers by agent violates fiduciary duty and the Principal had a remedy to sue the agent and charged him against crime. The Principal is not bound to identify transactions when an agent exceeds its authority which was beyond the scope of authority and it becomes difficult to separate within it. For example- Agent misuses Principal’s estate by selling and transferring the fund into his own account for no reason; this is most likely to be an abuse of agent’s authority and generally happens when the principal was mentally ill.
CONCLUDING REMARK:
Power of Attorney is an effective way to grant someone you have trust the power to take decisions of legal and financial matters on their behalf whether you are competent or not. It can be for a limited or general time period according to POA. The Principal must execute valid Power of Attorney (POA) by notarising and must be signed and sealed by both the principal and agent. Each party must understand the nature of the situation and work on the principle of trust and good intention. A general rule to find out the liability of an agent’s liability is to see his lack of reasonable care and attention to his work.
This article is written by Poornima Gupta, student of BA LLB. 2nd Year at Delhi Metropolitan Education affiliated to GGSIPU.
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