Power of attorney

A power of attorney or letter of attorney in common law systems or mandate in civil law systems is an authorization to act on someone else's behalf in a legal or business matter. The person authorizing the other to act is the "principal" or "grantor (of the power)", and the one authorized to act is the "agent" or "attorney-in-fact" ^*. The attorney-in-fact acts "in the principal's name" -- for example, by signing the principal's name to documents.

Attorney-in-fact

As one kind of agent, an attorney-in-fact is a fiduciary for the principal, so the law requires an attorney-in-fact to be completely honest with and loyal to the principal in their dealings with each other. If the attorney-in-fact is being paid to act for the principal, the contract is a separate matter from the power of attorney itself, so if that contract is in writing, it is a separate document, kept private between them, whereas the power of attorney is intended to be shown to various other people.

The term "attorney-in-fact" should not be confused with the term "attorney at law." An attorney-at-law is a lawyer -- someone licensed to practice law in a particular jurisdiction.

Oral and written powers of attorney

The power of attorney (often called "POA" for short) may be verbal—such as asking someone else to sign your name on a cheque because your arm is broken—or may be in writing. Many institutions, such as hospitals, banks and, in the United States, the Internal Revenue Service, require a power of attorney to be in writing before they will honor it, and they usually want to keep an original for their records.

The equal dignity rule

The "equal dignity rule" is a principle of law that requires a document authorizing someone representing someone else to have been appointed with the same formality as required for the act the representative is going to perform, and it applies to powers of attorney. This means, for example, that if you give someone your power of attorney to sign the papers to sell your house, and the law requires that signature on the deed to be notarized, then your power of attorney authorizing that attorney in fact to sign the deed must be notarized, too.

Kinds of powers of attorney

A power of attorney may be "special" or "limited" to one specified act or type of act, or it may be "general," and whatever it defines as its scope is what a court will enforce as being its scope. (It may also be limited as to time.) Under the common law, a power of attorney becomes ineffective if its grantor dies or becomes "incapacitated," meaning unable to grant such a power, because of physical injury or mental illness, for example unless the grantor (or principal) specifies that the power of attorney will continue to be effective even if the grantor becomes incapacitated (but any such power ends when the grantor dies). This type of power of attorney is called a "durable power of attorney". In some jurisdictions such a durable power of attorney can also function as a "living will", which can be used to appoint someone to make health-care decisions for the grantor, up to and including "pulling the plug" on machines keeping them clinically alive. New York State has enacted a "Health Care Proxy" law that requires a separate document be prepared appointing one as your health care agent.

In some U.S. states and other jurisdictions it is possible to enact a springing power of attorney; i.e., a power that only takes effect after incapacitation of the grantor or some other definite future act or circumstance. After such incapacitation the power is identical to a durable power, but, unlike a durable power, cannot be invoked before the incapacity. This is often used to allow a spouse or family member to manage the grantor's affairs in case illness or injury makes him unable to act, while retaining the power for himself before the incapacity occurs.

Unless the power of attorney has been made "irrevocable" (by its own terms or by some legal principle), the grantor may revoke the power of attorney by telling the attorney in fact it is revoked; however, if the principal does not inform third parties and it is reasonable that the third parties could rely upon the power of attorney being in force, the principal may still be bound by the acts of the agent, though the agent may also be liable for such unauthorized acts.

Many standardized forms are available (usually for free) for various kinds of powers of attorney, and many organizations provide them for their clients, customers, patients, employees, or members. In some states statutory power of attorney forms are available as some individuals have used powers of attorney to unscrupulously waste the assets of vulnerable individuals such as the elderly (see elder abuse).

Attorney in Fact in the case of Unincorporated Reciprocal Inter-insurance Exchanges

In the context of the unincorporated reciprocal inter-insurance exchange ^* the AIF is a stakeholder/trustee who takes custody of the subscriber funds placed on deposit with him, and then uses those funds to pay insurance claims. When all the claims are paid, the AIF then returns the leftover funds to the subscribers.

Abuses of Attorney-In-Fact

The powers granted to an attorney-in-fact are sometimes abused, in disregard of the attorney's fiduciary responsibility. Some large lending institutions insert appointment of attorney-in-fact paragraphs in mortgages and Home Equity Line of Credit contracts. For example: "If Borrower fails to do any of the things referred to in the preceding paragraph, Lender may do so for and in the name of Borrower and at Borrower's expense. For such purposes, Borrower hereby irrevocably appoints Lender as Borrower's attorney-in-fact for the purpose of making, executing, delivering, filing, recording, and doing all things as may be necessary or desirable, in Lender's sole opinion, to complete the things referred to in the preceding paragraph."

The "things referred to in the preceding paragraph" may include "other documents" that increase interest rates in a so-called fixed rate mortgage, and sale of a house without permission when the lender's lawyer forges the owner's name on a deed.

Such appointment of attorney-in-fact is equivalent to confession of judgment.

External links

General Power of Attorney - free printable form for use in all 50 U.S. states

Power Of Attorney information from LexisNexis Martindale-Hubbell
Power of Attorney Legal Requirements- Durable Power of Attorney Legal Document Requirements and FAQs
New Power of Attorney Protections for the Elderly
Power of Attorney FAQ
Mental Capacity Act 2005 (England and Wales)

Law

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