Power of Attorney: Some basic rules (2)

Last week, we began this topic with basic information, description of the instrument called, ‘Power of Attorney’ and we noted that this is the authority given by the principal (donor) under seal or deed authorising the agent (donee) to act on his behalf for all his lawful transactions. We also stated that ‘Power of Attorney’  is a written instrument which authorizes one person to act as another’s agent or attorney, thereby making the agent to assume the rights of the principal.

Today, we shall be addressing some questions raised by some readers on the topic by way of putting up some basic rules that will guide the donor and the donee as well as the bank in executing a legally binding and effective power of attorney.

The bank will  have scrutiny, close monitor of the account to ensure consistency in transaction or establish a pattern of credit and debits. This will guide them in determining abnormal transaction and querying same, or exercise caution.

Also, the balance in the account will be monitored as overdraft of any form does not go in an account running on ‘Power of Attorney.

The bank will also ensure the ‘Power of Attorney’ is carrying signature as in the mandate of the original account owner and is properly witnessed.  The bank will also ensure the correct account is stated.

Normally, the bank branch would pass through its legal department for study and confirmation of the power granted, whether specific or general and the restrictions, if any.  No unauthorized use must be allowed:  Midland Bank V. Reckitt and others (1933).

The bank will also ensure the donee is well  known otherwise a convincing means of identification like international passport, driver’s license or national identity card must be presented and photocopies retained in the file of the original account owner (the donor). Invariably the bank retains a certified copy in the bank’s records.

For it to be legally binding the ‘Power of Attorney’ should be alive, that is, it is not more than 12 months old, except renewed.

Usually in Agency Law, anybody including infants can serve as agent, in this case, a donee or beneficiary of a ‘Power of Attorney’ as long as the principal, the donor, is an adult and has contractual capacity.

All cheques within the rules of banking services should be honoured as and when presented if there is nothing inimical to the payment in the ‘Power of Attorney’.

However, most banks would endeavour to avoid  any abuse of a ‘Power of Attorney’ especially by the donee, the beneficiary by any means.   Perhaps this is the reason why the ‘Power of Attorney’ should be studied from time to time.   It could be that the power is restrictive by intent in which case some withdrawals or transactions may be queried or at least referred to the donor before it can be honored especially when the bank has any reason to doubt the integrity of the said transaction or its conformity with the donor’s expressed interest.

Before expiration of its life, a ‘Power of Attorney’ can be revoked in any of the following circumstances:

A revocation can be caused by the donor after passage of time for which it was created, time here referring to a period of donor’s indisposition to run the account and not necessarily the 12 month life-span of ‘Power of Attorney’, which means it can be less than one year.

A revocation may be ordered by the donor with or without the consent of the donee in which case it is a unilateral revocation under the terms of the Power. This also implies that this would not be possible when the terms of the ‘Power of Attorney’ is Irrevocable.  A power of attorney is expressed to be irrevocable to protect the interest of the donee  who therefore can sue for damages if this right is not respected. Conversely it could be expressed to be Revocable to protect the donor’s will to either control the actions of the donee or assert himself as need may arise.

A ‘Power of Attorney’  may be revoked following the fulfillment of the purpose for which attorney was issued. In this case the purpose would have been stated in the Attorney document.

Also illegality of purpose or frustration of the purpose for which the ‘Power of Attorney’ was issued can force the donor or both parties to revoke the Power. In this case the purpose would also have been stated in the document.

There is an automatic revocation by law if either the donor or donee dies, becomes insane or bankrupt.  If it is the donee who suffers any of these, the donor must recover the deed from the donee’s estate for cancellation and notice to third parties who had dealing with the done.

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