Validity Of A Power Of Attorney And Diminished Mental Capacity
A power of attorney is a formal document by which a person (“the Principal”) authorises another person (“the Agent”) to conclude a juristic act like entering into an agreement which agreement will have legal consequences for the parties.
In order for the power of attorney to be valid, the Principal must have the necessary contractual capacity. In South Africa the law stipulates that a person who cannot understand the nature and consequences of granting a power of attorney cannot validly execute such a power of attorney.
The dilemma we often have is that many older persons are under the impression that when they grant power of attorney to an Agent, often such authority is given to a family member, attorney or financial adviser, to manage their property and affairs when they are no longer capable of doing so for themselves, that the power of attorney will remain effective until they pass away. However, in South Africa the power of attorney remains valid only for as long as the Principal is still capable of appreciating the concept and consequences of granting another person his/her power of attorney.
The problem arises when the Principal’s mental capacity starts to diminish and he/she loses the capacity to act, for instance when they are diagnosed with some sort of mental illness like dementia. Once a person becomes mentally incapacitated, they no longer have the legal capacity to act and therefor an existing power of attorney will terminate.
The result is that the Agent will no longer have any authority to act on behalf of the Principal as the Principal is mentally incapacitated and has no legal capacity. If the Agent continues to act in terms of the void power of attorney, the Agent will be exposing himself to be held personally liable for any losses suffered by a third party as a result of any transactions arising from the authority granted in the power of attorney.
The question is, how does one now deal with the Principal’s property and manage their affairs on their behalf going forward?
At present there are two legal procedures in terms of which a person can be appointed to administer the affairs of a person who is found to be incapable of managing their own affairs. These procedures are the common law procedure for the appointment of a curator, which process requires that an application is brought to the High Court (this process is very costly) and the second one is the procedure to appoint an administrator (which process is much more affordable) as set out in the Mental Health Care Act, 17 of 2002, which came into operation on 15 December 2004.
In conclusion, it is clear that a power of attorney is of little or no value to a person whose mental capacity is weakening and who wants to appoint an Agent to act on their behalf when they are no longer capable to do so themselves.
If you have any queries pertaining to the above, or require legal assistance with a similar situation, please contact our offices for the appropriate legal advice.
Lynda Chantler | ATTORNEY & CONVEYANCER |
Provided by Van Zyl Kruger
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