Legal documents and contracts are inundated with legal jargon enough to turn the head of any layperson. This is especially problematic when these documents deal with common and often inevitable circumstances – like aging. In South Africa, A power of attorney expires if the person for whom it was exercised becomes incapable of acting. This is not the case in many industrialized countries, in which the power of attorney also exists after the principal becomes incapable of doing business. This prevents the surviving spouse from having no control over their affairs when they are married in community of property. In South Africa, however, the law has not kept up to avoid an already suffering spouse from this situation and instead has to deal with substantial legal fees from the attorneys who ultimately control the incapacitated principal’s affairs. Corresponding recommendations were made almost two decades ago, but were never followed up. In view of the increasing average life expectancy from year to year and the increasing prevalence of Alzheimer’s and dementia – this legal loophole must be urgently and quickly addressed. This article was first published by Sanlam Investments. – Nadya Swart
Powers in South Africa – the deficits
By Lize de la Harpe
introduction
No one is inherently capable of acting on behalf of another – he or she must have the necessary authority to do so. This power of attorney is usually given in the form of a power of attorney.
A power of attorney is a formal document with which one person (“the principal”) authorizes / authorizes another (“the proxy”) to enter into legal transactions on their behalf. A legal act is an act that establishes legal relationships and has legal consequences, for example the conclusion of a contract.
A power of attorney is not a contract, but a declaration of intent by the principal that the proxy should act on his behalf. By signing a power of attorney, the principal not only authorizes the proxy to act, but also signals to third parties his will to be bound by the actions of the proxy. A duly authorized representative who legally concludes a contract on behalf of someone else is therefore protected from any liability arising from this contract. However, if the authorized representative is not properly authorized, the principal does not acquire any rights and obligations from this legal act and the third party can hold this authorized representative personally liable for any breach of the “warranty obligation”.
Capacity of the client
In order for the power of attorney to be valid, the principal must have the necessary contractual capacity. In South Africa, the agent law is based on the principle that an agent cannot do what his principal cannot do himself. In other words, no one can be empowered to take actions that you are incapable of doing yourself.
Therefore, a person who cannot understand the nature and consequences of issuing a power of attorney cannot effectively execute such a power of attorney.
The dilemma
Many older people want to have someone else manage their property and affairs. Often the intention is to take care of themselves when they are no longer able to do so. They then give this power of attorney to a family member, lawyer or financial advisor in the form of a power of attorney, as they assume that the power of attorney will remain valid until their death.
The problem arises when the headmaster’s mental performance deteriorates and he loses the ability to act. South African common law states that a power of attorney ends when the principal becomes mentally handicapped. In other words, when a principal can no longer perform the action in question, the agent can no longer do it for him. A validly concluded power of attorney therefore expires automatically as soon as the principal loses the capacity to act.
The dilemma: the agent suddenly has no authority to act on behalf of the principal, and the principal cannot act either because he is mentally disabled. If the proxy continues to act on the basis of the void power of attorney, he exposes himself personally to damage that a third party incurs as a result of transactions from the void power of attorney.
In this case there is the possibility of applying to the court for the appointment of an administrator or a curator, depending on the circumstances. This creates costs (both initial and ongoing), costs time, and makes the person’s health and financial affairs public. Another alternative would be to set up a family foundation, which itself takes time and could be too complex.
The permanent power of attorney
Countries such as Great Britain, Canada, USA, New Zealand and Australia have already introduced permanent powers of attorney, which remain in place despite the intellectual disability of the principal. The principal executes – while he is still mentally capable of acting – a power of attorney in which it is expressly stated that the power of attorney should remain valid despite a future reduction in performance by the principal.
The possibility of introducing such a system in South Africa has been studied by the South African Law Reform Commission. Recommendations were made in a draft law report entitled “Assisted Decision Making: Adults with Impaired Decision Making Capacity” (Discussion Paper 105 (January 2004)), but it is ten years later and the matter remains to be followed up.
Conclusion
In light of the above, it is clear that a power of attorney is of little or no value to someone who is concerned that their mental faculties will be weakened, or may be weakened in the future, and who wants someone to act on their behalf in that case. It is also questionable whether a permanent power of attorney is accepted in our law, since our right of representation is based on the principle that a representative cannot do what his client cannot do himself.
South Africa urgently needs to take care of adults with limited ability to make decisions – either through the introduction of new laws that provide a simpler and more accessible form of decision-making than our current board of trustees system, or through some kind of permanent power of attorney developed on the basis of our civic representation principles.
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