Appointment and authority of agents

The representation of another person presupposes the existence of authorisation mainly through power of attorney and the transaction carried out is valid and binding on the principal. According to the Contract Law Cap.149, the authority of an ‘agent’, appointed to act for or represent another in dealings with third persons, may be expressed or implied.

Authority is said to be expressed when it is given by words spoken or written. Authority is said to be implied when it is to be inferred from the circumstances of the case and things spoken or written. Conversely, a person untruly representing themselves to be an authorised agent, inducing a third person to deal with them as such, is liable to make compensation in respect of any loss or damage caused by them.

There are declarations, documents or transactions conducted by a representative whereby the law does not require their authority to be written and certified. However, in other cases, the law requires this in the form of a power of attorney and if not, a transaction performed may be declared null and void. The issue may also be examined on whether a party ratified or disowned the transaction or whether, due to their behaviour, the principal is estopped from denying the validity of an act, either by conduct or through the principles of equitable or proprietary estoppel.

An agent with authority, may do every lawful thing is necessary. Moreover, an agent has authority, in an emergency, to do all such acts for the purpose of protecting their principal from loss as would be done by a person of ordinary prudence under similar circumstances.

With regard to immovable property, for an agent to be accepted, either for the transfer or mortgage of a property, the agent must submit legally certified written authorisation/power of attorney. If authorisation is not legally certified, it may cause the transfer or mortgage to be declared null and void.

Moreover, agents should inform their principal of their acts so as not to leave room for the principal to question them. Being aware of the act, the principal will be obliged to ratify it and such ratification may be expressed or implied in the conduct of the person on whose behalf the act was done. If the principal elects to disown it, they must do so immediately, otherwise it will be considered ratified.

An issue can also be raised with a third party when they do not accept the legal authorisation and refuse to execute the instructions of an agent who acts personally, too.

A decision issued by the District Court of Larnaca dated October 6 is typical in a dispute between a banking institution and customers. The bank, through an employee, refused to accept a general power of attorney that a customer produced requesting to add his wife and daughter to his bank account, to avoid haircut of his pre-haircut deposits. Despite the instructions, the bank employee, unjustifiably and in breach of contract did not proceed with their addition, resulting in a haircut of the amount in the account.

The court raised the following questions in analysing the legal aspect of the case: (a) whether the general powers of attorney from the wife and daughter authorised the agent to sign any documents required by the bank, (b) whether the bank correctly refused the request based on the content documents presented to them, and (c) whether the bank and the employee can be held liable for the damage caused to the agent, his wife and daughter.

The court answered the three questions in favour of the customers and concluded that the bank in breach of its duties and contract refused to carry out a perfectly legal and permissible instruction of the agent causing him damage. The catalytic role played by the employee, as well as his position of authority, made it obvious that he acted negligently and the bank is responsible for his actions. The court issued a judgment that the money lost in the haircut plus legal interest and costs be paid in compensation.

George Coucounis is a lawyer practicing in Larnaca and founder of GEORGE COUCOUNIS LLC, Advocates & Legal Consultants, www.coucounis.law, [email protected]