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A Complete Guide on Power of Attorney

Nevin Clinton, Flywork.io TeamFlywork.io. 

    A Power of Attorney (hereinafter referred to as POA) is an important document that allows a person to appoint an attorney or an agent to act on his behalf. The agent can then make decisions on behalf of the principal on matters like finances, medical care, property, etc. Now, there are various types of POAs and each one gives varying degrees of power or control to the agent. 

Definition of Power of Attorney

     Section 2(21) of the Indian Stamp Act, 1899 defines ‘Power of Attorney’ as one that includes any instrument (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it.

Types of POAs

      POAs are of two types broadly –

General and Specific. In the former, a vast amount of power is given to the agent whereas in the latter he is empowered in just a particular aspect. Therefore, the power granted to the agent is expressly limited in specific POAs. There are also other types such as durable POAs. Here, the principal empowers the agent to act on his behalf even if he reaches a stage where he can’t communicate. This can be due to serious illness or injury. Yet another type is a medical POA. These empower the agent to make decisions on behalf of the principal specifically in cases of medical illness. 

Uses of POA

 Following are the decisions and legal aspects for which a Power of Attorney can be used.

  • Agreements: A POA can empower an agent to enter into contracts and to sign, execute or deliver any agreement.
  • Property: An agent upon being empowered by a POA can make decisions on the properties of the principal. He can lease, sell, collect rents, and so on. He can also execute contracts in this regard. 
  • Stocks: An agent can sell and buy stocks and enter into contracts for the same.
  • Tax: Filing and signing of tax returns and other tax-related documents can be done by the agent. 
  • Banking: An agent can execute cheques and security agreements on behalf of the principal. He can also deposit and withdraw funds. 

Pros and cons of POAs

    A Power of Attorney helps make things simple for the principal. With a trustworthy agent to take care of important aspects relating to property, tax, and contracts, the principal need not go through the burden of having to take care of each of the above. Further, even if there is scope for misuse of power by the agent, a POA can always be revoked.

    A disadvantage as mentioned above is the possibility of misuse of power by the agent. If the POA is not drafted well or the agent decides to go rogue, several risks are involved. But then, it is worth noting that even if an agent commits fraud, the principal cannot be held responsible for it. 

Points to remember while drafting POAs

  • Complete details on agent and principal: A POA must have the name, address, property owned, and such details on the principal and the agent. It must also be signed by both and there must be two witnesses of sound mind. 
  • Granting power: The POA must then have details on what powers the agent will have and can exercise on behalf of the principal. While granting such powers, the POA must be strictly construed. Thus, there must be complete clarity and no room for ambiguity. 
  • Registration: Registering a POA is not compulsory, but it is advisable. The Registration Act, 1908 mandates that it is the Sub Registrar who must authenticate it. 

Revocation of POA

     The principal has the right to revoke a POA through a written statement. Further, the death or bankruptcy of the principal would also lead to the automatic revocation of the POA. Also, in cases of specific POAs, if the objective for which the agent was appointed is satisfied, it would be revoked by itself. There can also be a mutual agreement between the principal and agent agreeing that the POA will get revoked to broaden the happening of an event. 

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