There are instances where a person cannot physically attend to some transactions. If for example, a certain amount is to be paid to someone but he cannot personally claim the same, another person may receive it on his behalf. The person paying the amount would then usually require a certain document from said representative to prove that he indeed was authorised to receive the amount. That document is usually a special power of attorney or an SPA. Some clients would often inquire if I can issue them a special power of attorney for them to claim something from someone. They are of course of the mistaken notion that since it is a “special power of attorney” the one who is supposed to give the power is an attorney or a lawyer. The term “attorney” does not only refer to a lawyer but also to a person legally authorised or appointed to transact business for another. A person then who is authorised to transact business for a principal is the “attorney” of said person and he may not be a lawyer as long as the requirements stated by law are complied with.
The Civil Code says: “No one may contract in the name of another without being authorized by the latter…” (Article 1317). The article states the general rule: No one may contract in the name in the name of another. This must be so since a person cannot be compelled to comply with the obligations arising from a contract he did not enter into himself. The same article states the exception to the rule that a person may contract in the name of another provided he has been authorised by that person. Although no form is required by law, it is usually through a document denominated as “special power of attorney” that the agent may transact in the name of his principal. This legal relationship between an agent and principal is covered by the Civil Code provisions on Agency, Title X, Chapter 1, Articles 1868 until1932. Agency may be general which pertains practically to all the business relations of the principal while special deals with particular transactions only. Although no particular form is required, a written authority is required when it comes to the sale of land or any interest therein. But what becomes of the contract entered into by an unauthorised person? The law says that the contract entered into by an unauthorised person, or by an agent who has exceeded his authority shall be unenforceable. It has no legal effect but the principal may ratify the contract and it can then be enforced against him.
In business transactions, it is prudent that an agent be required to show proof of his authority to transact on behalf of his principal since a contract entered into by a person for another without the latter’s authority is unenforceable with respect to the supposed principal. An unenforceable contract cannot be enforced even through court action.
Use of SPA
One might ask, can a person be authorised to appear during a marriage ceremony and sign the marriage contract on behalf of one of the contracting parties? Marriage through a proxy or representative is not allowed because the law requires the parties to appear personally before the solemnising officer but almost all other contracts may be done through an agent or representative. The civil code states that an SPA is required: to compromise, waive any obligation, in the acquisition of real properties, to loan or borrow money, to lease real property, to create or convey real rights, to accept or repudiate an inheritance, among others. Nowadays, SPAs are usually employed when it comes to sale of lands especially if the principal is abroad, when filling claims or applications before any office through a representative, and even when a lawyer appears without his client during pre-trial since during this stage admissions may be made and compromise may be had. Many are now careful and are not willing to accept a simple authorisation letter as proof of authority of the agent. Requiring an SPA may be an added security since a notarised document has more credibility than an authorisation letter.