What is a power of attorney?
Powers of attorney are more common than many people think, for example in the case of legal representatives (the right to represent a party in court), cashiers (the right to sell products on behalf of the shop) and guardians (the right to perform certain acts for another person that they are not considered capable of performing themselves).
It is possible to conclude powers of attorney both as a legal person and as an individual. The person who receives the power of attorney is called the assignee and the person who gives the power of attorney is called the principal. When the assignee uses his/her power of attorney against a third person, performing legal acts against a third person, the counterparty is called a third party.
A power of attorney can be either limited or unlimited. A limited power of attorney can, for example, relate to only one act, to withdraw SEK 500 from the principal’s bank account. An unlimited power of attorney is often referred to as a general power of attorney and in most cases relates to all acts that the principal can perform.
What is competence and what is authority?
When drawing up a power of attorney, it is important to be aware of two key concepts – authority and power of attorney.
The authority in a power of attorney is the limit to what the attorney can do, what legal acts it can perform, for example buying a boat on behalf of the principal.
The power of attorney, on the other hand, is even more specific and indicates what the assignee is allowed to do, often in the form of more specific instructions. For example, it may specify that the boat to be purchased by the assignee must be of a certain make or price.
It is important to keep these two concepts separate because the third party does not need to be aware of the authority, but what the third party needs to see is the authorization, that the assignee has the right to perform this legal act in the name of the principal.
If an assignee acts outside the instructions given to him by the principal regarding competence and authority, there are consequences. If the assignee acts beyond his authority, the intended contract will not be legally binding on the principal, provided that the third party did not have a justified belief that the assignee was entitled to enter into the contract. If the third party has a legitimate expectation of validity, the assignee will thus be liable to compensate the principal. If the assignee exceeds his authority, he is in breach of contract with the principal, and the consequences of the breach of contract must be regulated in the power of attorney agreement.
Given that the responsibility placed on the holder of the power of attorney is significant and can have major legal consequences, it is important that the power of attorney is well drafted and clear. It is also encouraged that the power of attorney is concluded in writing, mostly because it is good evidence in case of conflicts. In order to facilitate the interaction between principal and assignee, it is also important that the limits of competence and authority are set clearly, for example by emphasizing the maximum price that may be paid for a purchase.
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