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What should we know about the Power of Attorneys?

What should we know about the Power of Attorneys?

It is widely accepted practice in business to carry out a wide array of activities by simply assigning another person to carry out that particular activity via power of attorney. However, a lot of assigners and assignees are not well aware of the legal implications and consequences of such activities.

What is the power of attorney?

A power of attorney is a written power of attorney that a person gives to another person to appear before a third party[1].

Taking into consideration the fact that a lot of people have not been paying due attention to the legal implications of power of attorney several disputes arose, which gave a chance to the Court of Cassations (the Court) of the RA to duly interpret this concept. To eliminate the legal uncertainty, the Court provided an exhaustive interpretation of the legal framework regarding the power of attorney.  

The position of the Court in this regard.

So, in one of the issued decisions regarding this concept, the Court of Cassations expressed the following opinion: Bases for arising of Obligatory legal relationships can be transactions, including unilateral transactions (contractual obligations), and legal acts (torts) i.e. legal facts caused by the inflicted damage. The power of attorney may be the basis for the creation of the obligatory legal relationship, as it is a unilateral transaction that obliges the representative to act within the powers defined in it and reserves the right to act on behalf of the representative[2].

Hence, for this part, we can conclude, that the power of attorney is a unilateral transaction. It can be easily conferred that unilateral transactions can be the legal basis for the creation of obligations. Therefore, the relevant provisions of the Civil Code of RA concerning obligations apply.

Obligations must be performed properly in accordance with the terms of the obligation, the law, the requirements of other legal acts, and in the absence of such terms and conditions, the customs of business circulation or other commonly required requirements shall apply[3].

Therefore, by virtue of Article 347 of the RA Civil Code, the representative is obliged to properly exercise the powers assumed by the power of attorney i.e. obligations. In case of non-fulfillment or improper fulfillment of obligations, the representative bears the risk of unfavorable consequences, including the risk of inflicting damage.

The legal consequences of improper fulfillment of obligations stated in Power of Attorney

So, what happens if you carry out the assignments stated in the power of attorney improperly.

The subjective right of the Assigner in the obligation relationship is the right of the demand, which can be exercised when the Assignee properly fulfills the obligation imposed on him[4].

In case of improper fulfillment of obligations, a person whose right has been violated may claim full compensation for the damages caused to him, unless less than the amount of compensation for damages is provided by law or contract[5].

If the assignee fulfills the provided assignments improperly, the damage inflicted from that improper assignment shall be compensated.

According to Article 1058 of the Civil Code damage caused to the citizen, to the property of a citizen, as well as to the property of a legal entity, is subject to full compensation by the person who caused it.

To summarize, it is always important for the parties to always state the scope of the given assignments as definitely as possible to avoid undesirable consequences of possible non-fulfillment of obligations.

Disclaimer:

This material is produced by Legelata LLC. The material contained in this newsletter is provided for general information purposes only and does not contain a comprehensive analysis of each item described. Before taking (or not taking) any action, readers should seek professional advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this material.


[1] Civil code of the Republic of Armenia, https://www.arlis.am/documentview.aspx?docid=161514.

[2] Decision of Court of Cassations N ԵԿԴ/1447/02/12, http://datalex.am/?app=AppCaseSearch.

[3] See footnote 1.

[4] See footnote 2.

[5] See footnote 1.