Definition and Legal Classification of the Authorized Representative
Ein Authorized Representative is a person who, by virtue of a legal act of authorization, is entitled to conduct legal transactions or perform legal acts on behalf of and with effect for another (the so-called principal). The figure of the authorized representative plays a central role, especially in civil law, but also in public law. Authorization is one of the most important instruments of representation and is of considerable practical importance for the organization of legal transactions.
Distinction: Authorized Representative, Representative, and Messenger
To classify the authorized representative legally, a precise distinction from the representative and the messenger is required:
- Ein Authorized Representative acts within the framework of a granted power of attorney and is generally a representative in terms of § 164 BGB.
- Ein Representative is any person who acts in the name of another (the represented person) with effect for and against this person.
- Ein Messenger merely delivers another’s declaration of intent and does not make their own decisions.
Legal Basis of Authorization
Requirements and Types of Power of Attorney
Basic Requirements
An authorization can generally be granted informally, that is, orally or impliedly (§ 167 para. 1 BGB). In certain cases, such as real estate transactions, a specific form is required (see § 311b para. 1 BGB).
Types of Power of Attorney
- Internal Power of Attorney: The power of attorney is declared directly to the authorized representative.
- External Power of Attorney: The power of attorney is declared directly to the third party for whom the representation is relevant.
- General Power of Attorney: It authorizes the undertaking of all legal transactions that the principal may undertake.
- Individual Power of Attorney: The authority to represent is limited to a specific legal transaction.
- Special Power of Attorney: It relates to clearly defined actions or areas of business.
Scope of Representative Authority
The scope of the authorized representative’s authority to represent is determined by the content of the power of attorney declaration. Third parties can rely on the power of attorney communicated to them in accordance with § 173 BGB, provided there is no conflict between internal and external authority.
Effects of Representation
If the authorized representative acts effectively within the scope of the authority granted to him, the legal effects apply directly to the principal (§ 164 para. 1 BGB). The authorized representative generally does not acquire any personal claim or obligation.
Rights and Duties of the Authorized Representative
Rights
- Exercise of Representative Authority: The authorized representative is entitled to act in the name of the principal.
- Reimbursement of Necessary Expenses: According to § 670 BGB, the authorized representative may claim reimbursement for expenses incurred in the course of performing his duties.
Duties
- Acting within the Scope of the Power of Attorney: The authorized representative must comply with the power of attorney and any internal instructions.
- Duty of Accountability and Surrender: He is obliged to report to the principal on the conduct of business and surrender everything obtained in this context (§ 667 BGB).
- Damages for Breach of Duty: In case of culpable exceeding of authority or other breaches of duty, the authorized representative may be liable for damages according to the provisions on agency (§ 280 BGB).
Authorized Representative in German Civil Law
In the German Civil Code (BGB), power of attorney is a subcategory of representation (§§ 164 et seq. BGB). It is generally freely revocable, unless its irrevocability has been agreed in exceptional cases or is legally provided for (§ 168 sentence 2 BGB).
Powers of attorney can also arise independently of a legal transaction, for example in the case of legal or statutory representation; in such cases, other statutory provisions are decisive.
Examples of Application
- Business Representation: Authority to act and commercial power of attorney under commercial law (§§ 54, 48 HGB)
- Representation of Partners: Representation of legal entities by authorized representatives appointed as organs, such as managing directors
- Power of Attorney for Precaution: Authorized representatives are often appointed to handle health or financial matters when the principal lacks legal capacity.
Authorized Representative in Public Law
Authorization can also play a role in public law. For example, participants in an administrative procedure can, under § 14 VwVfG, involve authorized representatives to support their procedures and to give or receive declarations.
In tax law, the concept of the authorized representative is regulated in the Fiscal Code (§§ 80 et seq. AO). Here, a distinction is made between authority to receive, authority for service of process, and the generally comprehensive power of representation.
Expiration of the Power of Attorney and the Status of the Authorized Representative
Reasons for Expiry
- Revocation by the principal
- Termination of the underlying legal relationship: For example, by completion of an order, death, or incapacity (with exceptions under § 168 sentence 1, 2nd half sentence BGB)
- Expiration of Time: In the case of temporary authorization
The expiration of a power of attorney is generally only effective towards third parties when they become aware of it or under the conditions of § 170 BGB.
Abuse, Exceeding Authority, and External Power of Attorney
If an authorized representative violates internal instructions or exceeds the granted authority to represent, this can have different legal consequences. While the granted external power of attorney is decisive in relation to third parties, there is usually a claim for damages in the internal relationship.
Special Features and Limits of Authorization
- Invalidity of Authorization for Highly Personal Legal Transactions (e.g. marriage, will)
- Prohibition of Representation in Case of Conflict of Interest: The authorized representative may not act in his own name and in the name of the principal at the same time unless expressly permitted (§ 181 BGB).
Conclusion
The authorized representative is a key figure in civil and public law, whose activity enables the smooth execution of numerous legal transactions. The comprehensive legal regulation ensures legal certainty among the parties involved and serves as a foundation for a wide range of applications, from everyday business transactions to representation in judicial and extrajudicial proceedings. Understanding the concept of the authorized representative and its legal classification is essential for the effective application and structuring of representation relationships.
Frequently Asked Questions
What duties does an authorized representative have after accepting the power of attorney?
An authorized representative is obliged to carry out the tasks assigned to him by the power of attorney carefully and conscientiously, in the interest of and according to the instructions of the principal (the represented person). His main duties include only acting within the powers granted by the power of attorney. If the authorized representative acts outside this framework, his actions towards the third party represented are generally invalid; however, a so-called apparent or tolerated power of attorney may apply if the representative appears to be authorized to the outside world. In addition, the authorized representative has a duty of accountability: He must inform the principal comprehensively about the actions taken upon request or after completion of the task and render accounts upon demand. If the authorized representative breaches his duty of care, for example by improper execution or acting on his own initiative outside the instructions, he may be liable for damages to the principal (§ 280 BGB).
In which cases does the power of attorney of an authorized representative end automatically?
The power of attorney of an authorized representative ends automatically upon the occurrence of several events regulated by law. The most important reasons include revocation of the power of attorney by the principal, the death of the principal or the authorized representative, and the accomplishment of the purpose for which the power of attorney was granted. Under German law (§ 168 BGB), the power of attorney can also be limited to a certain period or granted for a specific purpose—after the purpose is achieved or the period expires, the authority ends automatically. In addition, the principal’s incapacity can lead to the expiration, unless the power of attorney was designed as a so-called trans-mortal (valid beyond death) or post-mortal (valid from death) power of attorney. In these special cases, the power of attorney continues to be valid or becomes effective with or after the death of the principal.
What must an authorized representative observe when concluding contracts?
When concluding contracts, an authorized representative must ensure that he acts in the name of the principal (the so-called principle of disclosure under § 164 para. 1 BGB). This means that at the time of concluding the contract, he must make it unequivocally clear that he is acting as a representative and not on his own behalf. If he fails to do so and does not disclose his representative status, he will be personally liable under the contract. Furthermore, the authorized representative must always observe the limits of the granted power of attorney; otherwise, he will be personally liable as a so-called representative without authority (§ 179 BGB), unless the principal subsequently approves the transaction. When concluding contracts requiring specific forms—such as real estate purchases, which must be notarized—the power of attorney must also usually be notarized (§ 167 para. 2 BGB).
What is the liability of the authorized representative towards third parties?
The authorized representative is generally not personally liable for obligations entered into on behalf of the principal towards third parties, provided he acts within the scope of validly granted authority and discloses his representative status. However, if he exceeds the limits of his power of attorney or acts without authority, he is usually personally liable to the third party for performance or damages (§ 179 BGB), unless the third party was aware of the lack of authority or subsequently approves the transaction. Liability can also arise if the authorized representative breaches his duty of care while conducting business, causing damage to the third party.
Can an authorized representative transfer his power of attorney to other persons?
Whether an authorized representative may transfer his power of attorney in whole or in part to other persons depends on the content of the power of attorney issued to the representative. In principle, the transfer of a power of attorney to so-called sub-authorized persons is only permissible if this is expressly provided for in the power of attorney or arises from the circumstances (§ 167 BGB). Such a sub-power of attorney allows the representative to authorize a third party to carry out the transactions in his own name. However, the issuance of a sub-power of attorney may be excluded, particularly if the principal demands the personal execution of the tasks for reasons of trust. With certain types of power of attorney, e.g., general power of attorney, special caution is required as the risk of abuse increases.
Is there a confidentiality obligation for the authorized representative?
Whether a confidentiality obligation exists generally depends on the contractual relationship between the principal and the representative. In the case of a power of attorney analogous to the law of agency or service contracts (§§ 662 ff. BGB), the authorized representative may be obligated to treat the principal’s sensitive information confidentially and not to disclose it to third parties. If the authorization is granted within certain professions, such as lawyers, tax advisors, or doctors, professional confidentiality obligations apply. Breach of such a duty may give rise to civil claims (such as damages or injunction) as well as criminal consequences.
Can the authorized representative be held liable for damages caused by improper exercise of the power of attorney?
Yes, the authorized representative can be held liable for damages resulting from improper, negligent, or abusive exercise of the power of attorney. Such liability generally arises under § 280 BGB if the authorized representative breaches his contractual or statutory duties and the principal suffers damage as a result. If the authorized representative acts in a professional capacity (e.g., as a lawyer or managing director), he may be subject to a heightened duty of care. Gross negligence or intent may lead to stricter liability; for the slightest negligence, liability may be limited contractually under certain conditions, provided no statutory prohibitions prevent this.
