REPRESENTATION AND THE LIABILITY OF THE REPRESENTATIVE: LEGAL BASIS, TYPES OF LIABILITY, AND TERMINATION OF REPRESENTATION AUTHORITY

Representation and the Responsibility of the Representative:

The role of an agent and their responsibilities are significant in the legal world. An agent is a person authorized to perform legal transactions on behalf of another. This authorization typically manifests in various roles such as power of attorney, agency, or lawyer. While performing legal transactions on behalf of the person they represent, agents have specific responsibilities.

Representation:

Representationis the act of a person performing a legal transaction on behalf of another person, rather than acting in their own name or for their own benefit. By performing the transaction on behalf of another, a person ensures that the legal consequences of the transaction fall upon that person. Representation relationships generally occur in two ways: statutory representation and voluntary representation. Statutory representation arises from situations defined by law (for example, the representation of minors and those under guardianship). Voluntary representation, on the other hand, is a representation relationship established by the will of the parties. For example, a lawyer representing their client through a power of attorney.

An agent can use one of two methods when conducting a legal transaction with a third party on behalf of and for the account of the principal: indirect representation and direct representation. In indirect representation, the agent performs the legal transaction in their own name and then transfers the rights and obligations arising from this transaction to the principal. In indirect representation, although the legal consequences of the transaction occur on the agent, the economic consequences occur on the principal once the agent transfers them. In direct representation, the agent, when conducting the legal transaction with the third party, explicitly states to the other party that they are doing so on behalf of and for the account of the principal, and that the rights and obligations arising from this transaction belong directly to the principal. The principal is a party to the contract, and all rights and obligations occur on the principal. For direct representation to exist, the agent must perform the legal transaction on behalf of the principal and be authorized to do so. For the legal transaction to be considered as having been performed on behalf of the principal, the agent must act with the intention of representing the principal and inform the other party of this. If the agent fails to inform the counterparty that they are acting on behalf of and for the account of the principal, the agency is generally considered invalid, and the agent is deemed to have conducted the transaction in their own name and for their own account. 

Representative's Authority:

The power of representation is granted through a unilateral declaration of intent. For an agent to perform legal transactions on behalf of the principal, they must possess specific authorization. This authorization is usually provided by a power of attorney given by the principal to the agent. The agent must act within the limits of the authority granted to them. If the power of representation given by the principal to the agent covers all types of legal transactions, it is called general power of representation; if it covers a specific legal transaction, it is called special power of representation.

Representative's Responsibilities:

The agent must act carefully and diligently when exercising their powers. The agent must protect the interests of the principal and must not cause them harm. The situations in which the agent's liability arises are as follows:

Duty of Care: The agent must protect the interests of the principal and exercise due care and diligence to avoid causing harm. Failure to comply with this duty may result in legal and sometimes criminal liability for the agent.

Accountability: The agent is obligated to account for transactions conducted on behalf of the principal. This includes providing information about the transactions and, if necessary, transferring the profits to the principal.

Unauthorized Representation: Unauthorized representation occurs when an agent performs a legal transaction on behalf of the principal without the authorization granted by the principal. For a legal transaction to be binding on the principal, the principal must consent to it. Otherwise, the unauthorized agent is personally liable for the consequences of the transaction. If the principal consents, this consent has retroactive effect. If the principal does not consent to the transaction, and the other party suffers damages due to the invalidity of the transaction, the principal may claim compensation from the agent. However, the unauthorized agent's liability for damages is waived if they prove that the other party knew or should have known that they lacked the authority to represent the agent.

Abuse of Authority:An agent becomes liable if they abuse their authority to the detriment of the principal. Abuse of authority occurs when the agent acts for personal gain or against the interests of the principal. In this case, the principal can directly claim compensation for the damages incurred. Furthermore, the agent may face legal and criminal liability.

Types of Responsibilities of an Agent

The responsibilities of an agent can be grouped under three headings: legal, criminal, and financial responsibilities

1. Legal Responsibility:
   • If an agent acts unlawfully while exercising their power of representation, they incur legal liability. In this case, the transactions may be invalid, and the agent may face direct legal sanctions.
2. Criminal Liability:
   • An agent may be held criminally liable for abuse of power, fraud, or other criminal acts.
3. Financial Responsibility:
   • The agent may be liable to compensate the principal for any damages incurred. Financial liability typically takes the form of paying compensation.

 

Termination of Representation Authority:

The power of representation may terminate for various reasons:

Revocation of Power of Attorney: The principal has the right to partially or completely revoke the power of attorney granted to the agent. Complete revocation is called cancellation, while partial revocation is called limitation. The principal can revoke the power of attorney unilaterally through a declaration of intent directed to the agent.

Automatic Termination of Representation Authority: Representation authority usually terminates in cases of death, disappearance, restriction of legal capacity, or bankruptcy of the principal or representative.

As a rule, an agent whose power of representation has expired cannot represent the principal or act on their behalf. However, a principal who has notified third parties that they have granted power of representation to the agent, but has not notified third parties that they have revoked or limited this power, cannot assert the revocation or limitation of the power of representation against third parties who were unaware of it in good faith.

 

The role of the agent and their responsibility are crucial legal matters, highlighting the necessity of exercising their authority correctly and honestly. The agent must act with care, diligence, and integrity when exercising their authority. Unauthorized representation or abuse of authority can result in legal, financial, and criminal liability for the agent. Therefore, it is of paramount importance that the agent uses their authority carefully and protects the interests of the principal.

 

Law Student Intern Nursena İbanoğlu