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") appoints another person (the "agent") to perform one or more specific acts on behalf of the principal. This document is used as evidence of the authority of the agent to third persons with whom the agent may be dealing when performing 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 permits the performance of acts of administration by the agent on behalf of the principal, while a Special Power of Attorney permits the performance of acts of strict ownership by the agent on behalf of the principal. This is further explained below.

• General Power of Attorney can be used to transact all the business of the principal. However, said transactions are limited to acts of administration. Acts of administration refer to those performed in the ordinary course of business.

Example: The principal has a business that sells clothes, the act of selling clothes is done in the ordinary course of business. This is an act of administration.

• Special Power of Attorney is used when the agent is authorized to act only in one or more specific transactions to do one or more specific acts or to act only during a specific occasion. These require those which affect the property rights of the principal which are called acts of strict ownership.

Example: If the principal has a business that sells clothes, the act of selling the factory is not in the ordinary course of business. This is an act of strict ownership and a Special Power of Attorney is required.

When is a Special Power of Attorney mandatory?

The law requires a Special Power of Attorney for certain acts to be valid, and these acts are called act 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:

• To make payments that are not in the ordinary course of the principal's business,
• To end an existing obligation by the creation of a new one by substituting the object or the parties to the obligation, 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 changed either through a donation or sale,
• To make gifts except customary ones 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 for the preservation of the things that are 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 oblige 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,
• To recognize obligations that were entered into before the Special Power of Attorney was signed, and
• To perform any act of strict ownership.

What is the consequence of a Special Power of Attorney?

When an agent acts on behalf of the principal and within the authority given to him under the Special Power of Attorney by the principal in relation to a third person, the third person's responsibility or obligation is to the principal and not to the agent.

The agent is generally not personally responsible to third parties unless the agent acts without authority such as when he 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 without authority which makes him responsible to the third person.

The principal can also grant the agent the authority to appoint a substitute to assist him in the performance of the acts on behalf of the principal which the agent has been authorized to do.

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,
• If desired, a substitute agent may be included, and
• Names of witnesses.

What is not allowed in a Special Power of Attorney?

The principal cannot allow and state in the Special Power of Attorney that the agent will perform acts that are required by law or public policy to be done by the principal personally and cannot be 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 as this involves acts of strict ownership. Likewise, the agent must also be of legal age.

Minors cannot execute or write a Special Power of Attorney. It is their parents or legal guardians who will execute the Special Power of Attorney in the exercise of their parental authority over the said minor.

What can be the duration of a Special Power of Attorney?

The Special Power of Attorney is valid until the acts indicated in the document are already performed or accomplished by the agent on behalf of the principal. The principal can also include an expiration date of the Special Power of Attorney so that even if the acts are not yet performed, the Special Power of Attorney will finish on that specific date. After that date, the agent can no longer act on behalf of the principal.

How can a Special Power of Attorney end?

As a general rule, a Special Power of Attorney can be canceled if desired by the principal. 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.

There are cases, however, in which the principal cannot simply cancel the Special Power of Attorney if he wants to. See the following examples:

• If the Special Power of Attorney states that it cannot be revoked or canceled at any time without the consent of the agent, then that must be followed. This is also called an irrevocability clause.
• If the agent will be paid by the principal a sum of money or commissions for services rendered under the Special Power of Attorney.

On the other hand, the Special Power of Attorney can end:

• If the agent no longer wants to continue doing the acts for which he was appointed under the Special Power of Attorney.
• 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 within the Philippines, it is valid even though it is not notarized. It is recommended to notarize a Special Power of Attorney if the principal and the agent want added protection of their rights. This way, 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.

However, if the Special Power of Attorney was signed in a foreign country, it must be notarized.

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

There should be at least two witnesses who should sign the Special Power of Attorney at the time it is acknowledged before a notary public so that other persons can attest to the agreement between the agent and the principal under the Special Power of Attorney. This is for the protection not only of the principal but also of 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.

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.

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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