Special Power of Attorney

What is a Special Power of Attorney?

A Special Power of Attorney is a written document wherein a person (the "principal") chooses someone (the "agent") to do one or more specific acts on the principal's behalf. This document is used as proof of the authority of the agent to third persons with whom the agent may be dealing when doing the act(s). In other countries, this may be referred to as a contract of agency.

What are the types of powers of attorney?

A Power of Attorney can be general or special.

A General Power of Attorney allows the agent to do things that are ordinary in the business or day-to-day transactions of the principal. These acts permitted under this power of attorney can be delegated by the principal to the agent in the same way an employee is allowed to work for the employer.

Example: The principal has a business that sells clothes, the act of selling clothes can be delegated by the principal to the agent, and a General Power of Attorney may be used if the agent is not employed by the principal so that the agent is permitted to sell the clothes.

On the other hand, a Special Power of Attorney is used when the acts to be delegated by the principal to the agent are special ones, or those which do not happen on daily events.

Example: If the principal has a business that sells clothes, the act of selling the clothes factory is not in the ordinary course of business. In this case, a Special Power of Attorney is required so that the agent can validly sell the factory.

Thus, the important thing to remember to differentiate the two is that the General Power of Attorney allows the delegation of tasks done in the ordinary course of business or the life of the principal, while a Special Power of Attorney allows the delegation of tasks that are not done in the ordinary course of business or the life of the principal.

When is a Special Power of Attorney mandatory?

The law requires a Special Power of Attorney for acts not in the ordinary course of business (major transactions) to be valid, and these acts are called acts of strict ownership. Without a Special Power of Attorney, the acts performed on behalf of the principal become invalid, meaning if a case is brought to a court of law concerning the acts performed, the court will declare said acts as void or illegal.

A Special Power of Attorney is necessary in the following cases (Note that the following is not a complete list but are merely examples):

• To make payments that are not done in day-to-day transactions,
• To end an existing obligation by the creation of a new one, e.g. from a sale of a car to a barter of a car with a house,
• To enter into a compromise to avoid litigation or to end one that has already started,
• To waive any obligations freely,
• To enter into a contract where the ownership of real property (e.g. land) is transferred either through a donation or sale,
• To make gifts except those for charity or those made to employees in the business managed by the agent,
• To loan or borrow money unless the borrowing of money is urgent and needed to preserve things under the agent's control or possession,
• To lease any real property such as lands and buildings to another person for more than one year,
• To oblige the principal to render some service without any payment,
• To bind the principal in a contract of partnership,
• To make the principal as a guarantor or surety,
• To create a mortgage, usufruct, easement, etc., over a real property such as lands and buildings,
• To accept or deny an inheritance, and
• To recognize obligations that were entered into before the Special Power of Attorney was signed.

What is the legal effect of a Special Power of Attorney?

When an agent acts on behalf of the principal and performs the acts stated under the Special Power of Attorney and deals with another person, that person's responsibility or obligation pertains to the principal and not to the agent unless the agent performs acts that are not included in the Special Power of Attorney.

Example: If the agent is authorized to only sell the building of the principal under the Special Power of Attorney, and the agent sells the principal's car (instead of the building). The agent in effect, acted in his own capacity (and not on the principal's behalf) which makes him responsible to the other person. The consequence is that the principal cannot be forced to respect the sale of the car.

What is not allowed in a Special Power of Attorney?

The principal cannot assign the agent to perform acts that should be done by the principal personally and cannot be legally delegated to an agent.

Examples: the principal should personally take or finish a bachelor's degree and not through an agent, the principal should marry another person on his own and not through an agent. Another example is that the principal cannot appoint an agent to take an oath of office after the principal wins in an election.

Who signs a Special Power of Attorney?

Both the agent and the principal, as well as the witnesses if any are involved in a Special Power of Attorney. The principal must be of legal age (18 years old and above) to sign a Special Power of Attorney. Likewise, the agent must also be of legal age.

Minors cannot sign a Special Power of Attorney. It is their parents or legal guardians who will sign the Special Power of Attorney in the exercise of their authority as parents or guardians over the minor.

How can a Special Power of Attorney be ended?

As a general rule, a Special Power of Attorney can be canceled if the principal wants to. In this case, the principal must send a letter called a Notice of Revocation to the agent and other persons who transacted with the agent under the Special Power of Attorney. A Notice of Revocation essentially states that the Special Power of Attorney is now canceled.

The Special Power of Attorney can also end:

• If there is nothing left to do by the agent because the purpose of the Special Power of Attorney has already been accomplished,
• If the Special Power of Attorney has an expiration date and this date arrives,
• If the agent no longer wants to continue doing the acts for which he was appointed under the Special Power of Attorney, and
• If the agent dies, then essentially the Special Power of Attorney ends.

What has to be done once Special Power of Attorney is ready?

Once the document is completed, the principal and the agent should read the document and sign all original copies of the document. The witnesses should also sign all the original copies of the document.

• If the document will not be notarized, at least two original copies of the document should be printed. One original copy should be given to the principal and the other should be given to the agent so the agent may use the same as evidence of his authority.
• If the document will be notarized, at least three original copies of the document should be printed, then the principal should bring all the original copies of the document together with his competent proof of identification to the notary public to acknowledge the execution of the document. The notary public will then affix his notarial seal on all copies of the document and keep one original copy of the document. The principal and agent will keep one original copy for each, and the last one will be kept by the notary public.

To notarize a document, the principal must personally appear before a notary public to acknowledge that he has voluntarily signed the document and that he signed the document as his free and voluntary act and deed. The principal must also present competent proof of identification that was issued by an official agency bearing the photograph and signature of the principal.

Is it necessary to notarize a Special Power of Attorney for it to be valid?

No, as long as the Special Power of Attorney was signed, it is valid even though it is not notarized.

Notarizing a Special Power of Attorney will result in added protection of the rights of the principal and the agent, this is because the Special Power of Attorney can easily be used as evidence if the parties go to court due to a dispute concerning acts involved in the Special Power of Attorney.

Note that the Special Power of Attorney must be notarized if:

• the Special Power of Attorney was signed in a foreign country,
• the acts to be done by the agent relate to real properties such as lands and buildings owned by the principal, and
• the acts to be done by the agent require him to face and transact with government agencies.

Is it necessary to have witnesses for Special Power of Attorney?

No. However, if there will be witnesses at least two witnesses should sign the Special Power of Attorney. This serves as an added protection to the principal and the agent.

• A witness protects the principal because the witnesses can attest to the fact that the principal appointed the agent to do certain acts for him, and
• A witness also protects the agent because the witnesses can attest to the fact that said agent was appointed and that the agent can perform the acts for which he was appointed.

Note that witnesses should be those persons who are not affected and are not interested in whatever outcomes the Special Power of Attorney will result in. Thus, the spouse of the principal or agent, his close family members, relatives, and employees cannot be witnesses to the Special Power of Attorney.

What are the costs involved in the finalization of Special Power of Attorney?

Notarization fees for a Special Power of Attorney are typically PHP100 to PHP500. No costs will be required if the Special Power of Attorney will not be notarized.

What must a Special Power of Attorney contain?

A Special Power of Attorney contains the following information:

• Identity of the principal (name, citizenship, civil status, and address) and the agent (name and address),
• The acts that the agent will be authorized to perform, and
• Names of witnesses if any.

Which laws are applicable to a Special Power of Attorney?

The Civil Code of the Philippines governs the law on agency. However, certain laws, such as the Rules of Court have certain provisions on the form of the Power of Attorney. Acknowledging a document before a notary public is governed by the 2004 Rules on Notarial Practice.

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