Validity of Power of Attorney after death of donor of power

[Anonymous]

What is the law relating to validity of the power of authority after the donor of the power has died, i.e., after the death of the person who issued the power of attorney (in favour of another person) has died?

[Dr. Ashok Dhamija]

This is a general question that often arises in relation to the validity of a Power of Attorney. The question is whether Power of Attorney (POA) is valid after the death of person who executed it, i.e., after the death of the donor of POA. The answer to this question would depend upon the facts of each case. But, generally speaking, a Power of Attorney becomes invalid after the death of the donor / principal. However, if it is an irrevocable Power of Attorney, for valuable consideration, creating an agency wherein the donee / agent has an interest in the subject-matter property, then such Power of Attorney may be valid even after the death of the donor / principal.

Though the Powers of Attorney Act, 1882, defines what is “Power of Attorney”, it is merely an inclusive definition. Section 1A of the said Act says that “Powers-of-Attorney” include any instrument empowering a specified person to act for and in the name of the person executing it.

Basically, a POA holder is an “agent” of the person executing the POA, as defined under Section 182 of the Contract Act, 1872, which is reproduced as under:

“182. “Agent” and “principal” defined.—An “agent” is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the “principal”.”

Under Section 2 of the Powers of Attorney Act, the donee of a power-of-attorney is empowered to execute or do any instrument or thing in and with his own name and signature, and his own seal, where sealing is required, by authority of the donor of the power; and every instrument and thing so executed and done, shall be as effectual in law as if it had been executed or done by the donee of the power in the name, and with the signature and seal, of the donor thereof.

The POA holder has thus the power to affect the position of his principal by doing acts on his behalf.

While the Powers of Attorney Act is silent on the issue of termination of POA, the Contract Act has provisions with regard to termination of “agency”. Since POA is also basically an agency, the provisions of the Contract Act would be applicable to the termination of POA.

Section 201 of the Contract Act lays down how an agency can be terminated:

“201. Termination of agency.—An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors.”

It should thus be clear that, generally speaking, an agency is terminated by the death of either the principal or the agent. Accordingly, generally speaking, a Power of Attorney is terminated by the death of either the donor of POA or of the donee of the POA.

However, Section 202 of the Contract Act lays down an exception to the above general rule of termination of agency:

“202. Termination of agency, where agent has an interest in subject-matter.—Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.

Illustrations

(a) A gives authority to B to sell A’s land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.

(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton and desires B to sell the cotton, and to repay himself, out of the price, the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death.”

Thus, where the agent himself has an interest in the property which forms the subject-matter of the agency, such agency cannot be terminated to the prejudice of such interest in the absence of an express contract. This situation will generally arise when the agent acquires such an interest in the subject-matter property for some valuable consideration paid or payable to the principal. In such situations, the agency may be irrevocable. However, if there is an express contract between the agent and the principal that even in such a situation, the agency may be terminated (subject to conditions, if any), in that case such agency may also be terminable.

Accordingly, if there is an irrevocable Power of Attorney (POA) creating an interest in favour of the donee  of the POA in respect of the property which forms the subject-matter of the POA, which is generally for some valuable consideration paid or payable to the donor of the POA, then such POA may not be terminated even after the death of the donor of POA and may continue to be valid. It may be binding on the heirs / successors of the donor of POA in these circumstances.

Barring the above exception, generally speaking, a POA gets terminated by the death of either the donor or of the donee of the POA.

     

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Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.

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