power of attorney vs deed of assignment

Deed of Assignment (for Intellectual Property)

In the realm of intellectual property, a Deed of Assignment is a formal legal document used to transfer all rights, title, and interest in intellectual property from the assignor (original owner) to the assignee (new owner). This is crucial for the correct transfer of patents, copyrights, trademarks, and other IP rights. The deed typically requires specific legal formalities, sometimes notarization, to ensure it is legally enforceable.

To be legally effective a deed of assignment must contain:

• Title of the Document : It should clearly be labeled as a "Deed of Assignment" to identify the nature of the document.
• Date : The date on which the deed is executed should be clearly mentioned.
• Parties Involved : Full names and addresses of both the assignor (the party transferring the rights) and the assignee (the party receiving the rights). This identifies the parties to the agreement.
• Recitals : This section provides the background of the transaction. It typically includes details about the ownership of the assignor and the intention behind the assignment.
• Definition and Interpretation : Any terms used within the deed that have specific meanings should be clearly defined in this section.
• Description of the Property or Rights : A detailed description of the property or rights being assigned. For intellectual property, this would include details like patent numbers, trademark registrations , or descriptions of the copyrighted material.
• Terms of Assignment : This should include the extent of the rights being transferred, any conditions or limitations on the assignment, and any obligations the assignor or assignee must fulfill as part of the agreement.
• Warranties and Representations : The assignor typically makes certain warranties regarding their ownership of the property and the absence of encumbrances or third-party claims against it.
• Governing Law : The deed should specify which jurisdiction's laws govern the interpretation and enforcement of the agreement.
• Execution and Witnesses : The deed must be signed by both parties, and depending on jurisdictional requirements, it may also need to be witnessed and possibly notarized.
• Schedules or Annexures : If there are detailed lists or descriptions (like a list of patent numbers or property descriptions), these are often attached as schedules to the main body of the deed.

Letter of Assignment (for Trademarks and Patents)

This is a less formal document compared to the Deed of Assignment and is often used to record the assignment of rights or licensing of intellectual property on a temporary or limited basis. While it can outline the terms of the assignment, it may not be sufficient for the full transfer of legal title of IP rights. It's more commonly used in situations like assigning the rights to use a copyrighted work or a trademark license.

For example, company X allows company Y to use their trademark for specific products in a specific country for a specific period.  

At the same time, company X can use a Letter of Assignment to transfer a trademark to someone. In this case, it will be similar to the Deed of Assignment. 

Intellectual Property Sales Agreement

An IP Sales Agreement is a detailed contract that stipulates the terms and conditions of the sale of intellectual property. It covers aspects such as the specific rights being sold, payment terms, warranties regarding the ownership and validity of the IP, and any limitations or conditions on the use of the IP. This document is essential in transactions involving the sale of IP assets.

However, clients usually prefer to keep this document confidential and prepare special deeds of assignment or letter of assignment for different countries.

IP Transfer Declaration

In the context of intellectual property, a Declaration is often used to assert ownership or the originality of an IP asset. For example, inventors may use declarations in patent applications to declare their invention is original, or authors may use it to assert copyright ownership. It's a formal statement, sometimes required by IP offices or courts.

When assigning a trademark, the Declaration can be a valid document to function as a proof of the transfer. For example, a director of company X declares that the company had sold its Intellectual Property to company Y. 

Merger Document

When companies or entities with significant IP assets merge, an IP Merger Document is used. This document outlines how the intellectual property owned by the merging entities will be combined or managed. It includes details about the transfer, integration, or handling of patents, copyrights, trademarks, and any other intellectual property affected by the merger.

In all these cases, the precise drafting of documents is critical to ensure that IP rights are adequately protected and transferred. Legal advice is often necessary to navigate the complexities of intellectual property laws.

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Understanding a deed of assignment for intellectual property

A deed of transfer is used to change the ownership of intellectual property, a common occurrence in business. Explore how and when to use one.

Find out more about intellectual property basics

by   Brette Sember, J.D.

Brette is a former attorney and has been a writer and editor for more than 25 years. She is the author of more than 4...

Read more...

Updated on: November 24, 2023 · 3 min read

Understanding intellectual property in business

How to transfer intellectual property rights in business, what to include in a deed of assignment, registering new ownership, restrictions on intellectual property transfers.

Most companies have intellectual property as part of their assets, including software, product design, or copyright to white papers. Buying or selling such property is done using a document called a deed of assignment.

A large part of what a business consists of may be tied to intellectual property . It's easy to see physical property a company owns, such as a building, office furniture, or inventory, but intellectual property can be more challenging to identify.

Most businesses have intellectual property, or works created by human minds or, in some cases, by computers. Some examples of intellectual property include architectural drawings, ad campaigns, company or product names, inventions, and source code.

Examples of when transfers of intellectual property might happen include when a company is buying another company, when you are setting up an LLC and want to transfer your intellectual property into the company, or when a business buys product rights from another company or individual.

A deed of assignment can be done in one transaction, instead of one transaction for each item of intellectual property, by transferring all ownership rights of all intellectual property detailed in the deed. The document is signed by both the buyer and seller. No payment is required for it to be valid.

A deed of assignment must be in writing and should include:

• The names and addresses of the assignor and assignee
• A description of the program or product for which the rights are being transferred
• A statement that all intellectual property rights to the property are being transferred
• Signatures of the parties and the date of the agreement execution

The deed could also include the following sections, where applicable:

• Consideration, or payment, to be made to the original owner.
• Warranties, or promises that the intellectual property rights being assigned don't infringe on anyone else's intellectual property rights . For example, in a deed regarding the transfer of a copyright, this section could state that the copyrighted work is original and not owned by someone else.
• Indemnification, or promise by the seller to reimburse the assignee if there is some problem with title to the property.
• Future assignments. For example, the agreement could be ongoing, so that anything the assignor creates in the future for this product or program is also transferred to the buyer.

Although a deed of assignment transfers ownership in intellectual property , it does not change the registration of the ownership. The assignee is responsible for handling all registration requirements.

For example, if a patent is transferred via a deed of assignment, the new owner must record the change in ownership with the U.S. Patent and Trademark Office. Similarly, the transfer of a copyright is recorded with the U.S. Copyright Office.

Transfers of intellectual property must comply with U.S. laws. One obvious caveat is that you can't transfer property you don't own. Transfers must also comply with antitrust laws, which are set up to prevent one company from completely dominating an industry.

If intellectual property rights are being transferred overseas, the transfer must comply with Export Administration Regulations and the International Traffic in Arms Regulations , which are designed to protect national security and trade.

The deed of assignment can be a crucial part of a business deal or transaction. You can create a deed of assignment yourself, or you can work with an attorney .

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Home » How to Transfer Real Estate with a Power of Attorney

How to Transfer Real Estate with a Power of Attorney

Jeramie Fortenberry

Attorney (J.D., LL.M.)

Last updated Mar 15, 2023

Table of Contents

A power of attorney is a legal document that authorizes one person, called an agent , to act on behalf of another person, called a principal. The agent owes a fiduciary duty to the principal. This means that the agent can only take actions for benefit the principal and should generally refrain from actions that benefit the agent personally.

Powers of attorney are used to plan for disability. A properly drafted power of attorney allows the principal to specify in advance who will govern his affairs if he becomes disabled. It avoids the need to open a guardianship or conservatorship with the court in order to deal with the principal’s assets. Instead, the agent can use the power of attorney to manage the disabled principal’s affairs without court involvement.

Powers of attorney are often used to transfer real estate. In the typical situation, the principal is physically or mentally disabled and cannot sign document on his or her own behalf. The person named as agent (usually a spouse or other family member) can use the power of attorney to sign the real estate documents—including the deed —without opening a guardianship or conservatorship or otherwise obtaining court permission.

Signing a deed with a power of attorney requires special care to ensure that the deed is worded correctly. The rules that apply can differ from state to state and are not always self-explanatory. To understand these rules, we need to look at the three places where the name of the current owner (called a grantor ) is listed on the deed: the vesting paragraph, the signature line, and the notary block.

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The Grantor’s Name in the Vesting Paragraph

The vesting paragraph is the portion of the deed that contains the language that transfers the real estate from the current owner ( grantor ) to the new owner ( grantee ). Given that the agent under the power of attorney will sign the deed, who should be listed in the vesting paragraph? Should the vesting paragraph list the grantor even though the grantor will not be signing the deed? Or should the vesting paragraph list the agent even though the agent is not the current owner?

The answer is that the vesting paragraph should always list the principal/grantor and not the agent. The reason has to do with the way land records or organized. When a third party—like a title insurance agent—is searching the land records, that person is trying to “connect the dots” between the different owners in the chain of title. If Ernest Hemingway is listed in the land records as an owner in the chain of title, the title examiner will look for a deed from Ernest Hemingway conveying the property to someone else. When the principal’s name is used in the vesting paragraph, it clarifies that the person conveying the property through the agent under the power of attorney is the same person that acquired the property at some earlier time. This helps connect all of the names in the land records.

The Grantor’s Name on the Signature Line (How to Sign the Deed)

The signature line is the place where the grantor signs the deed. It usually includes a blank line for the handwritten signature, with the name of the signor printed beneath the blank signature line. When a deed is signed using a power of attorney, the grantor (and not the agent) is usually listed as the signor in the printed text beneath the signature line. If Ernest Hemingway is the grantor, the signature line would look like this:

____________________ Ernest Hemingway

But remember that the grantor—Ernest Hemingway in this example—will not be the one signing the deed. Instead, the deed will be signed by the agent under the power of attorney. There are two ways for an agent to sign a deed or other document under a power of attorney. Each of these methods requires the agent, as signor, to write an additional phrase beside his name when he signs the deed. If we assume that Scott Fitzgerald is the agent for Ernest Hemingway, the signature may look like this:

Ernest Hemingway, by Scott Fitzgerald as Agent under Durable Power of Attorney ____________________ Ernest Hemingway

Alternatively, the signature may look like this:

Scott Fitzgerald as Agent for Ernest Hemingway under Durable Power of Attorney ____________________ Ernest Hemingway

The agent customarily writes one of the two phrases above in his or her own handwriting above the signature line for the principal. This makes it clear that the principal is the grantor, but that the agent is signing the document on behalf of the principal.

The Grantor’s Name in the Notary Acknowledgment

The last place that the grantor’s name appears is in the notary acknowledgment. The acknowledgment is the place where a notary public certifies that the person signing the document is who he or she claims to be. There are specific rules that a notary must follow to comply with state law. These rules include verification of the identity of the person signing the document, stamping the document with a notary seal, and (in some states) keeping a record of the transaction in the notary log.

Because the notary must ensure that the person signing the document is who he or she claims to be, the notary acknowledgment should list the person who is physically signing the document. When property is conveyed using a power of attorney, the notary block should reference the agent , even though the principal/grantor is listed in the vesting paragraph and on the printed portion of the signature line. The notary acknowledgment should include appropriate language to make it clear that the agent is signing on behalf of the principal (for example, Scott Fitzgerald as Agent for Ernest Hemingway ). Our online deed preparation service automatically includes the appropriate language when the property will be conveyed using a power of attorney.

Attorney Practice Note: California has a standard form of acknowledgment that does not permit customization, so the notary acknowledgment for a California deed will look substantially the same regardless of whether an agent is signing under a power of attorney. The notary that notarizes the form should be able to help complete the notary acknowledgment.

Extra Steps to Ensure that the Power of Attorney is Accepted

Even though a power of attorney can be used to convey real estate, title insurance companies are not required to accept the power of attorney. If the title insurance company refuses to insure title to property previously conveyed by power of attorney, there could be a cloud on title that affects the property value. There are a few steps you can take to help ensure that title companies are comfortable with property conveyed by power of attorney.

Be Sure the Power of Attorney is Effective to Transfer Real Estate

There are different types of powers of attorney. A springing power of attorney comes into effect at a later time, usually upon the mental or physical disability of the principal. A durable power of attorney , on the other hand, becomes effective immediately when it is signed and remains in effect when the principal becomes mentally or physically disabled.

The distinction between springing and durable powers of attorney can be important. If the power of attorney is a springing power of attorney, the title examiner may want to see proof that the principal was disabled when the agent signed the deed. This can be difficult to prove without physicians’ affidavits or other medical evidence. If, on the other hand, the power of attorney is a durable power of attorney , there is generally no need to show evidence of the principal’s disability. Most powers of attorney are structured as durable powers of attorney, so this is usually not an issue. But you should review the power of attorney to be sure that the principal does not need to be disabled for the power of attorney to become effective.

You should also be sure that the power of attorney includes language authorizing the transfer of real estate. If the power of attorney is a limited power of attorney, it may only authorize a few actions. If it is a general power of attorney, it may include sweeping language that gives the agent broad authority to do just about anything on behalf of the principal. Either way, you should be sure that the power of attorney includes language authorizing the agent to transfer real estate.

Attach a Copy of the Power of Attorney to the Deed

Many title examiners will want proof that there is a valid power of attorney naming the agent to act on behalf of the principal. They will also want to see language in the power of attorney that gives the agent authority to transfer the principal’s real estate. The best way to reassure the title examiner is to attach the power of attorney to the deed when the deed is filed. Attaching the power of attorney puts clear evidence of the agent’s authority in the land records. This could prevent title issues in the future, when the power of attorney may be difficult to locate.

Avoid the Appearance of Self-Dealing

A power of attorney is a fiduciary instrument. This means that the agent must only act on behalf of the principal and not to benefit the agent. Be sure that the agent is not acting for his or her own benefit, conveying the property to himself or herself, or releasing a mortgage made by the agent in favor of the principal. These types of situations can create title problems and possibly give rise to claims of self-dealing.

Consult with an attorney if you have questions about what actions the agent can and cannot take and whether there are any precautionary steps the agent should take to minimize the likelihood of legal challenges. This is especially important if the agent is taking actions that directly or indirectly benefit the agent personally.

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Deed of Assignment: Everything You Need to Know

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. 3 min read updated on January 01, 2024

Updated October 8,2020:

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. It states that a specific piece of property will belong to the assignee and no longer belong to the assignor starting from a specified date. In order to be valid, a deed of assignment must contain certain types of information and meet a number of requirements.

What Is an Assignment?

An assignment is similar to an outright transfer, but it is slightly different. It takes place when one of two parties who have entered into a contract decides to transfer all of his or her rights and obligations to a third party and completely remove himself or herself from the contract.

Also called the assignee, the third party effectively replaces the former contracting party and consequently assumes all of his or her rights and obligations. Unless it is stated in the original contract, both parties to the initial contract are typically required to express approval of an assignment before it can occur. When you sell a piece of property, you are making an assignment of it to the buyer through the paperwork you sign at closing.

What Is a Deed of Assignment?

A deed of assignment refers to a legal document that facilitates the legal transfer of ownership of real estate property. It is an important document that must be securely stored at all times, especially in the case of real estate.

In general, this document can be described as a document that is drafted and signed to promise or guarantee the transfer of ownership of a real estate property on a specified date. In other words, it serves as the evidence of the transfer of ownership of the property, with the stipulation that there is a certain timeframe in which actual ownership will begin.

The deed of assignment is the main document between the seller and buyer that proves ownership in favor of the seller. The party who is transferring his or her rights to the property is known as the “assignor,” while the party who is receiving the rights is called the “assignee.”

A deed of assignment is required in many different situations, the most common of which is the transfer of ownership of a property. For example, a developer of a new house has to sign a deed of assignment with a buyer, stating that the house will belong to him or her on a certain date. Nevertheless, the buyer may want to sell the house to someone else in the future, which will also require the signing of a deed of assignment.

This document is necessary because it serves as a temporary title deed in the event that the actual title deed for the house has not been issued. For every piece of property that will be sold before the issuance of a title deed, a deed of assignment will be required.

Requirements for a Deed of Assignment

In order to be legally enforceable, an absolute sale deed must provide a clear description of the property being transferred, such as its address or other information that distinguishes it from other properties. In addition, it must clearly identify the buyer and seller and state the date when the transfer will become legally effective, the purchase price, and other relevant information.

In today's real estate transactions, contracting parties usually use an ancillary real estate sale contract in an attempt to cram all the required information into a deed. Nonetheless, the information found in the contract must be referenced by the deed.

Information to Include in a Deed of Assignment

• Names of parties to the agreement
• Addresses of the parties and how they are binding on the parties' successors, friends, and other people who represent them in any capacity
• History of the property being transferred, from the time it was first acquired to the time it is about to be sold
• Agreed price of the property
• Size and description of the property
• Promises or covenants the parties will undertake to execute the deed
• Signatures of the parties
• Section for the Governors Consent or Commissioner of Oaths to sign and verify the agreement

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Content Approved by UpCounsel

• Define a Deed
• Contract for Deed California
• Contract for Deed in Texas
• Assignment Law
• Deed Contract Agreement
• Assignment Of Contracts
• Legal Assignment
• Deed vs Agreement
• Assignment Legal Definition
• Contract for a Deed

Deed of Assignment and Transfer of Rights [Parts and Template]

A Deed of Assignment and Transfer of Rights is a legal document used when a person or a company who originally was a party to a contract (also known as the assignor or transferor) transfers his or its rights under the contract to another party (the assignee or transferee).

Accordingly, when the Deed of Assignment and Transfer of Rights has been drafted on the basis that in the original contract there is no prohibition to or restriction on assignment, and hence signed by both parties, it can be consequently assigned without the other contracting party’s consent.

In this article, I’ll try to dissect a sample Deed of Assignment and Transfer of Rights of a St. Peter Life Plan and provide descriptions of its fundamental elements or parts. As drafting a deed requires abundant caution, presence of mind, and knowledge of property and other allied laws, I highly advise that you seek help from experts and experienced in legal transactions.

Parts of a Deed of Assignment and Transfer of Rights

[1] Title of Deed . As implied above, deeds come in different forms and types. Check if the document and the first section displays the title – Deed of Assignment and Transfer of Rights. Conventionally, the first paragraph runs:

  KNOW ALL MEN BY THESE PRESENTS:

This deed, made and entered made and entered into this 13 rd day of January 2018 at the City of Manila, by and between:

[2] Parties Involved . A Deed of Assignment and Transfer of Rights must contain accurate information about the identities of the assigning and assigned parties. Other information such as age legality, citizenship, and postal address must be included, just as seen below:

Juan De la Cruz, Filipino citizen, of legal age, married to Josefina De la Cruz, and with residence and postal address at 123 Kasiglahan Street, Karangalan Village, Dela Paz, Pasig City, Philippines, hereinafter referred to as the “ASSIGNOR/TRANSFEROR”

Sebastian Maliksi, Filipino citizen, of legal age, single, and with residence and postal address at 456 Kasimanwa Street, Karangalan Village, Dela Paz, Pasig City, Philippines, hereinafter referred to as the “ASSIGNEE/TRANSFEREE”

[3] Contract Details . A Deed of Assignment and Transfer of Rights must contain a detailed description of the contract, hence in the context here – St. Peter Traditional Life Plan (St. Anne) contract and the Life Plan Agreement (LPA) Number:

WHEREAS, the ASSIGNOR/TRANSFEROR is the owner of life / memorial plan contract which is identified as St. Peter Traditional Life Plan (St. Anne), with Life Plan Agreement No. 123456;

[4] Contract Assignment and Transfer Agreement . As one of the most important and critical parts, this specifies the terms and conditions of the agreement. See sample below:

WHEREAS, for and in consideration of the value of the plan and out of accommodation and assistance for the ASSIGNEE/TRANSFEREE, the ASSIGNOR/TRANSFEROR is assigning and transferring all his/her rights and interests over the Life Plan mentioned in the immediately preceding paragraph to the ASSIGNEE/TRANSFEREE;

NOW, therefore for and in consideration of forgoing premises, the parties hereto have agreed on the following terms and conditions, to wit;

THE ASSIGNOR/TRANSFEROR, hereby waives all his / her rights and interests in the subject life plan in favor of the ASSIGNEE/TRANSFEREE. It is understood that when the Life Plan is assigned / availed of, then all obligations of St. Peter Life Plan, Inc. are fulfilled and discharged.

As a consequence of this assignment / transfer of rights, the ASSIGNEE/TRANSFEREE hereby assumes all the obligations and accountabilities of the ASSIGNOR/TRANSFEROR to St. Peter Life Plan, Inc. in connection with the life plan contract which it issued to the latter.

The ASSIGNEE/TRANSFEREE obligates and / or undertakes to comply with and abide by the requirements which St. Peter Life Plan Inc. may impose in connection with the purchase, possession, and use of the said Life Plan particularly the requirement that it should be fully paid before the memorial service could be availed of pursuant to the Life Plan.

[5] Execution . Once the Deed of Assignment and Transfer of Rights is drafted, the parties involved shall execute it by affixing their signatures. Other than the assigning and assigned parties, witnesses should also sign all the pages of the document. In addition, the deed shall be acknowledged and notarized by a legal practitioner.

IN WITNESS WHEREOF the parties have hereunto set their hands on the date and place first above written.

[  Assignor/Transferor]                           [Assignee/Transferee]

SIGNED IN THE PRESENCE OF:

[Witness]                                                    [Witness]

Disclaimer: Although much effort has been exerted in the creation of this article, the author disclaims any legal expertise and does not guarantee the accuracy and legitimacy of any or all of the information. Hence, it is advised that you consult with professionals such as insurance brokers and lawyers before engaging in legal transactions.    

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Law Office of Justin R. McCarthy

Criminal defense & civil litigation, ✍ power of attorney – how to sign deeds and other legal documents.

A power of attorney (POA) authorizes someone to sign legal or financial paperwork on your behalf.

The person who creates the POA is referred to as the principal.

The person authorized to sign on the principal’s behalf is referred to as the attorney-in-fact.

Most people understand how a POA works.

However, many people (including lawyers) don’t know how to format or execute deeds signed by an attorney-in-fact.

The procedure is outlined in Massachusetts Land Court Guideline 15 .

The guideline states that the deed must be “executed in the name of the principal.”

According to the guideline,

where A.B. is the principal, a deed beginning “I, C.D.,” or “I, C.D. as attorney for A.B” is an improper form as to the granting clause, and will be ineffective as the deed of the principal.  The deed should be drafted by reciting in the granting clause the principal’s name only, as though there was no power of attorney.

In addition, the attorney-in-fact should sign using the principal’s name only.

Guideline 15 gives the following example.

We’ll assume that Mary Doe is the principal and that John Doe is her attorney in fact under a power of attorney: /s/Mary Doe By John Doe her Attorney in Fact under Power of Attorney, recorded with (Registry of Deeds) Book —-, Page —– In this instance, John will actually sign Mary’s name .

Finally, the notary clause should state that the document is the free act and deed of the principal, not the attorney-in-fact.

However, the clause should note that the attorney-in-fact was actually the person who appeared and signed.

Here’s the Guideline’s example.

Then personally appeared the aforementioned John Doe and acknowledged the foregoing instrument to be the free act and deed of Mary Doe.

If you have any questions about signing deeds or other legal documents using a POA, please contact me at [email protected].

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Deed of Assignment or Deed of Novation: Key Differences and Legal Implications of Novation and Assignment Contracts

Novation and assignment stand out as pivotal processes for the transfer of contractual rights and obligations. These legal concepts allow a party to the contract to adapt to changing circumstances, ensuring that business arrangements remain relevant and effective. This article explores the nuances of novation and assignment, shedding light on their distinct legal implications, procedures, and practical applications. Whether you’re a business owner navigating the transfer of service contracts, or an individual looking to understand your rights and responsibilities in a contractual relationship, or a key stakeholder in a construction contract, this guide will equip you with the essential knowledge to navigate these complex legal processes.

Table of Contents

• What is a Deed of Novation? 
• What is a Deed of Assignment? 

Key Differences Between Novation and Assignment Deeds

Need a deed of novation or assignment key factors to consider, selecting the right assignment clause for your contract – helping you make the right choice, what is a deed of novation.

Novation is a legal process that allows a new party to a contract to take the place of an original party in a contract, thereby transferring both the responsibilities and benefits under the contract to a third party. In common law, transferring contractual obligations through novation requires the agreement of all original parties involved in the contract, as well as the new party. This is because novation effectively terminates the original contract and establishes a new one.

A novation clause typically specifies that a contract cannot be novated without the written consent of the current parties. The inclusion of such a clause aims to preclude the possibility of novation based on verbal consent or inferred from the actions of a continuing party. Nevertheless, courts will assess the actual events that transpired, and a novation clause may not always be enforceable. It’s possible for a novation clause to allow for future novation by one party acting alone to a party of their choosing. Courts will enforce a novation carried out in this manner if it is sanctioned by the correct interpretation of the original contract.

Novation is frequently encountered in business and contract law, offering a means for parties to transfer their contractual rights and duties to another, which can be useful if the original party cannot meet their obligations or wishes to transfer their contract rights. For novation to occur, there must be unanimous consent for the substitution of the new party for the original one, necessitating a three-way agreement among the original party, the new party, and the remaining contract party. Moreover, the novation agreement must be documented in writing and signed by all involved parties. Understanding novation is essential in the realms of contracts and business dealings, as it provides a way for parties to delegate their contractual rights and responsibilities while freeing themselves from the original agreement.

What is a Deed of Assignment?

A deed of assignment is a legal document that facilitates the transfer of a specific right or benefit from one party (the assignor) to another (the assignee). This process allows the assignee to step into the assignor’s position, taking over both the rights and obligations under the original contract. In construction, this might occur when a main contractor assigns rights under a subcontract to the employer, allowing the employer to enforce specific subcontractor duties directly if the contractor fails.

Key aspects of an assignment include:

• Continuation of the Original Contract: The initial agreement remains valid and enforceable, despite the transfer of rights or benefits.
• Assumption of Rights and Obligations: The assignee assumes the role of the assignor, adopting all associated rights and responsibilities as outlined in the original contract.
• Requirement for Written Form: The assignment must be documented in writing, signed by the assignor, and officially communicated to the obligor (the party obligated under the contract).
• Subject to Terms and Law: The ability to assign rights or benefits is governed by the specific terms of the contract and relevant legal statutes.

At common law, parties generally have the right to assign their contractual rights without needing consent from the other party involved in the contract. However, this does not apply if the rights are inherently personal or if the contract includes an assignment clause that restricts or modifies this general right. Many contracts contain a provision requiring the consent of the other party for an assignment to occur, ensuring that rights are not transferred without the other party’s knowledge.

Once an assignment of rights is made, the assignee gains the right to benefit from the contract and can initiate legal proceedings to enforce these rights. This enforcement can be done either independently or alongside the assignor, depending on whether the assignment is legal or equitable. It’s important to note that while rights under the contract can be assigned, the contractual obligations or burdens cannot be transferred in this manner. Therefore, the assignor remains liable for any obligations under the contract that are not yet fulfilled at the time of the assignment.

Choosing Between Assignment and Novation in a Construction Contract

Choosing between a deed of novation and an assignment agreement depends on the specific circumstances and objectives of the parties involved in a contract. Both options serve to transfer rights and obligations but in fundamentally different ways, each with its own legal implications, risks, and benefits. Understanding these differences and considering various factors can help in making an informed decision that aligns with your goals.

The choice between assignment and novation in a construction project scenario, where, for instance, an employer wishes to engage a subcontractor directly due to loss of confidence in the main contractor, hinges on several factors. These are:

• Nature of the Contract:  The type of contract you’re dealing with (e.g., service, sales) can influence which option is more suitable. For instance, novation might be preferred for service contracts where obligations are personal and specific to the original parties.
• Parties Involved: Consent is a key factor. Novation requires the agreement of all original and new parties, making it a viable option only when such consent is attainable. Assignment might be more feasible if obtaining consent from all parties poses a challenge.
• Complexity of the Transaction: For transactions involving multiple parties and obligations, novation could be more appropriate as it ensures a clean transfer of all rights and obligations. Assignment might leave the original party with ongoing responsibilities.
• Time and Cost: Consider the practical aspects, such as the time and financial cost associated with each option. Novation typically involves more complex legal processes and might be more time-consuming and costly than an assignment.

If the intention is merely to transfer the rights of the subcontractor’s work to the employer without altering the subcontractor’s obligations under a contract, an assignment might suffice. However, if the goal is to completely transfer the main contractor’s contractual role and obligations to the employer or another entity, novation would be necessary, ensuring that all parties consent to this new arrangement and the original contractor is released from their obligations.

The legal interpretations and court decisions highlight the importance of the document’s substance over its label. Even if a document is titled a “Deed of Assignment,” it could function as a novation if it transfers obligations and responsibilities and involves the consent of all parties. The key is to clearly understand and define the objective behind changing the contractual relationships and to use a deed — assignment or novation — that best achieves the desired legal and practical outcomes, ensuring the continuity and successful completion of the construction project.

Understanding the distinction between assignment deeds and novation deeds is crucial for anyone involved in contractual agreements. Novation offers a clean slate by transferring both rights and obligations to a new party, requiring the consent of all involved. Assignment, conversely, allows for the transfer of contractual benefits without altering the original contract’s obligations. Each method serves different strategic purposes, from simplifying transitions to preserving original contractual duties. The choice between novation and assignment hinges on specific legal, financial, and practical considerations unique to each situation. At PBL Law Group, we specialise in providing comprehensive legal advice and support in contract law. Our team is dedicated to helping clients understand their options and make informed decisions that align with their legal and business objectives. Let’s discuss!

Authored By Raea Khan

Director Lawyer, PBL Law Group

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• assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Powers of attorney: the requirements for a deed

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If a document containing a power of attorney does not satisfy these requirements for a deed, it will not be valid.

This means that the attorney will have no authority to bind the principal. If the power of attorney does satisfy the requirements, the principal will not be bound by any acts of the attorney which fall outside the scope of the power.

A power of attorney can only be given by deed and the following formalities must be satisfied:

• the deed must be in writing;
• it must be made clear that it is intended to be a deed (this can be done by using wording such as “by way of deed…” at the start of the instrument and “executed as a deed” at the end);
• the deed must be validly executed as a deed by the principal (in the case of an individual, this means that it must be signed by the principal in the presence of a witness who then attests the principal’s signature); and
• the deed must be delivered, at which point it will bind the principal (under common law, a deed is delivered when a party indicates an intention to be bound by it). Delivery is usually addressed in the deed by using wording such as “This deed is delivered on the date at the start of this deed”.

If a document containing a power of attorney does not satisfy these requirements for a deed, it will not be valid. This means that the attorney will have no authority to bind the principal. If the power of attorney does satisfy the requirements, the principal will not be bound by any acts of the attorney which fall outside the scope of the power.

Absent shareholders

Powers of attorney are often used to complete transactions where a party will be absent from the completion meeting. In  Katara Hospitality v Guez [2018] EWHC 3063 (Comm) , three shareholders had agreed to sell shares in a company. Two of the shareholders were unable to attend the completion meeting so their US lawyer arranged for them to sign powers of attorney in favour of the third shareholder. The documents were described as powers of attorney and their signatures were appropriately witnessed. But the word ‘deed’ was not used anywhere in the documents.

At the completion meeting, the attending shareholder, relying on the two powers of attorney, signed a guarantee on the absent shareholders’ behalf. At a later point, the beneficiary of the guarantee made a claim under it, at which point the absent shareholders claimed that they were not liable as the powers of attorney were not valid.

The High Court agreed. It was not convinced that the shareholders, or their US lawyer, understood the English law requirements for a power of attorney and that it must be executed as a deed to be valid. The document was simply described as a power of attorney and this was not sufficient for the court to infer that the parties intended the document to be classed as such.

Agency and scope

A power of attorney which fails to meet the strict requirements may still result in an agency arrangement, where the attorney is appointed as agent of the principal. An agent in this scenario will have authority to act on behalf of the principal if the act falls within the scope of the authority conferred on the agent.

The High Court reached this conclusion as the document could still take effect in writing. The shareholder who attended the completion meeting was appointed as agent of the absent principals. But the execution of a guarantee, which was a new document, prepared and agreed at the completion meeting, was not within the scope of authority granted to the agent.

The powers gave the agent the authority to sign documents “in connection with completion” of the transaction. The powers of attorney were sent to the buyer’s solicitor along with a statement that they were to be used “in the event there are any changes that require documents to be re-signed”. When the powers of attorney were executed by the absent shareholders, the guarantee was not in their contemplation as at that point it did not form part of the completion documents. It was not a document which required “re-signing” but was a completely new document, negotiated and agreed at the completion meeting. It was held that the agent was not authorised to sign the guarantee on behalf of the other shareholders.

Importance of execution

This decision confirms that simply describing a document as a ‘power of attorney’ will not be sufficient to create a legally binding power. Each of the individual requirements for the creation of a deed must be satisfied.

It also reminds us of the importance of checking what the deed actually allows the attorney to do.

If you are asked to rely on another party signing via a power of attorney, you must confirm that the power has been properly granted and that the act being contemplated is within the attorney’s authority. If this is not the case, any documents signed or executed under that power of attorney are likely to be invalid and not legally binding.

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When Assigning the Right to Pursue Relief, Always Remember to Assign Title to, Or Ownership in, The Claim

• Posted on: Oct 4 2016

Whether a party has standing to bring a lawsuit is often considered through the constitutional lens of justiciability – that is, whether there is a “case or controversy” between the plaintiff and the defendant “within the meaning of Art. III.” Warth v. Seldin, 422 U.S. 490, 498 (1975). To have Article III standing, “the plaintiff [must have] ‘alleged such a personal stake in the outcome of the controversy’ as to warrant [its] invocation of federal-court jurisdiction and to justify exercise of the court’s remedial powers on [its] behalf.” Id. at 498–99 (quoting Baker v. Carr , 369 U.S. 186, 204 (1962)).

To show a personal stake in the litigation, the plaintiff must establish three things: First, he/she has sustained an “injury in fact” that is both “concrete and particularized” and “actual or imminent.” Lujan v. Defenders of Wildlife , 504 U.S. 555, 560 (1992) (internal quotation marks omitted). Second, the injury has to be caused in some way by the defendant’s action or omission. Id . Finally, a favorable resolution of the case is “likely” to redress the injury. Id . at 561.

When a person or entity receives an assignment of claims, the question becomes whether he/she can show a personal stake in the outcome of the litigation, i.e. , a case and controversy “of the sort traditionally amenable to, and resolved by, the judicial process.’” Sprint Commc’ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 285 (2008) (quoting Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 777–78 (2000)).

To assign a claim effectively, the claim’s owner “must manifest an intention to make the assignee the owner of the claim.” Advanced Magnetics, Inc. v. Bayfront Partners, Inc. , 106 F.3d 11, 17 (2d Cir. 1997) (internal quotation marks and brackets omitted). A would-be assignor need not use any particular language to validly assign its claim “so long as the language manifests [the assignor’s] intention to transfer at least title or ownership , i.e., to accomplish ‘a completed transfer of the entire interest of the assignor in the particular subject of assignment.’” Id. (emphasis added) (citations omitted). An assignor’s grant of, for example, “‘the power to commence and prosecute to final consummation or compromise any suits, actions or proceedings,’” id. at 18 (quoting agreements that were the subject of that appeal), may validly create a power of attorney, but that language would not validly assign a claim, because it does “not purport to transfer title or ownership” of one. Id.

On September 15, 2016, the New York Appellate Division, First Department, issued a decision addressing the foregoing principles holding that one of the plaintiffs lacked standing to assert claims because the assignment of the right to pursue remedies did not constitute the assignment of claims.  Cortlandt St. Recovery Corp. v. Hellas Telecom., S.à.r.l. , 2016 NY Slip Op. 06051.

BACKGROUND :

Cortlandt involved four related actions in which the plaintiffs – Cortlandt Street Recovery Corp. (“Cortlandt”), an assignee for collection, and Wilmington Trust Co. (“WTC”), an indenture trustee – sought payment of the principal and interest on notes issued in public offerings. Each action alleged that Hellas Telecommunications, S.a.r.l. and its affiliated entities, the issuer and guarantor of the notes, transferred the proceeds of the notes by means of fraudulent conveyances to two private equity firms, Apax Partners, LLP/TPG Capital, L.P. – the other defendants named in the actions.

The defendants moved to dismiss the actions on numerous grounds, including that Cortlandt, as the assignee for collection, lacked standing to pursue the actions. To cure the claimed standing defect, Cortlandt and WTC moved to amend the complaints to add SPQR Capital (Cayman) Ltd. (“SPQR”), the assignor of note interests to Cortlandt, as a plaintiff. The plaintiffs alleged that, inter alia , SPQR entered into an addendum to the assignment with Cortlandt pursuant to which Cortlandt received “all right, title, and interest” in the notes.

The Motion Court granted the motions to dismiss, holding that, among other things, Cortlandt lacked standing to maintain the actions and that, although the standing defect was not jurisdictional and could be cured, the plaintiffs failed to cure the defect in the proposed amended complaint. Cortlandt St. Recovery Corp. v. Hellas Telecom., S.à.r.l. , 47 Misc. 3d 544 (Sup. Ct., N.Y. Cnty. 2014).

The Motion Court’s Ruling

As an initial matter, the Motion Court cited to the reasoning of the court in Cortlandt Street Recovery Corp. v. Deutsche Bank AG, London Branch , No. 12 Civ. 9351 (JPO), 2013 WL 3762882, 2013 US Dist. LEXIS 100741 (S.D.N.Y. July 18, 2013) (the “SDNY Action”), a related action that was dismissed on standing grounds.  The complaint in the SDNY Action, like the complaints before the Motion Court, alleged that Cortlandt was the assignee of the notes with a “right to collect” the principal and interest due on the notes. As evidence of these rights, Cortlandt produced an assignment, similar to the ones in the New York Supreme Court actions, which provided that as the assignee with the right to collect, Cortlandt could collect the principal and interest due on the notes and pursue all remedies with respect thereto. In dismissing the SDNY Action, Judge Oetken found that the complaint did not allege, and the assignment did not provide, that “title to or ownership of the claims has been assigned to Cortlandt.” 2013 WL 3762882, at *2, 2013 US Dist. LEXIS 100741, at *7. The court also found that the grant of a power of attorney (that is, the power to sue on and collect on a claim) was “not the equivalent of an assignment of ownership” of a claim. 2013 WL 3762882 at *1, 2013 US Dist. LEXIS 100741 at *5. Consequently, because the assignment did not transfer title or ownership of the claim to Cortlandt, there was no case or controversy for the court to decide ( i.e. , Cortlandt could not prove that it had an interest in the outcome of the litigation).

The Motion Court “concur[red] with” Judge Oeken’s decision, holding that “the assignments to Cortlandt … were assignments of a right of collection, not of title to the claims, and are accordingly insufficient as a matter of law to confer standing upon Cortlandt.”  In so holding, the Motion Court observed that although New York does not have an analogue to Article III, it is nevertheless analogous in its requirement that a plaintiff have a stake in the outcome of the litigation:

New York does not have an analogue to article III. However, the New York standards for standing are analogous, as New York requires “[t]he existence of an injury in fact—an actual legal stake in the matter being adjudicated.”

Under long-standing New York law, an assignee is the “real party in interest” where the “title to the specific claim” is passed to the assignee, even if the assignee may ultimately be liable to another for the amounts collected.

Citations omitted.

Based upon the foregoing, the Motion Court found that Cortlandt lacked standing to pursue the actions.

Cortlandt appealed the dismissal. With regard to the Motion Court’s dismissal of Cortlandt on standing grounds, the First Department affirmed the Motion Court’s ruling, holding:

The [IAS] court correctly found that plaintiff Cortlandt Street Recovery Corp. lacks standing to bring the claims in Index Nos. 651693/10 and 653357/11 because, while the assignments to Cortlandt for the PIK notes granted it “full rights to collect amounts of principal and interest due on the Notes, and to pursue all remedies,” they did not transfer “title or ownership” of the claims.

The Takeaway

Cortlandt limits the ability of an assignee to pursue a lawsuit when the assignee has no direct interest in the outcome of the litigation. By requiring an assignee to have legal title to, or an ownership interest in, the claim, the Court made clear that only a valid assignment of a claim will suffice to fulfill the injury-in-fact requirement. Cortlandt also makes clear that a power of attorney permitting another to conduct litigation on behalf of others as their attorney-in-fact is not a valid assignment and does not confer a legal title to the claims it brings. Therefore, as the title of this article warns: when assigning the right to pursue relief, always remember to assign title to, or ownership in, the claim.

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What Is a Power of Attorney (POA)?

• How a POA Works
• Health Care POA
• Financial POA
• How to Set Up a POA
• Choosing a POA

The Bottom Line

• Trust & Estate Planning

Power of Attorney (POA): Meaning, Types, and How and Why to Set One Up

How this can legally impact your finances, property, or medical care

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Investopedia / Laura Porter

A power of attorney (POA) is a legal authorization that gives the agent or attorney-in-fact the authority to act on behalf of an individual referred to as the principal. The agent may be given broad or limited authority to make decisions about the principal's property, finances, investments, or medical care.

POAs can be financial or they can pertain to health care. Both provide the attorney-in-fact with general or limited powers.

Key Takeaways

• A power of attorney is a legal document that gives one person the power to act for another.
• The person who receives the authority is referred to as the agent or attorney-in-fact.
• The subject of the POA is called the principal.
• The agent can have broad legal authority or limited authority to make decisions about the principal's property, finances, or medical care.
• A durable power of attorney continues to remain in effect if the principal becomes ill or disabled and cannot act personally.

How a Power of Attorney (POA) Works

A power of attorney is a legal document that binds the agent or attorney-in-fact and the principal. It's used in the event of a principal's temporary or permanent illness or disability or when they can't sign necessary documents. Both parties must sign the document and a third party is usually required to witness it.

Most POA documents authorize the agent to represent the principal in all property and financial matters as long as the principal’s mental state of mind is good. The agreement automatically ends if the principal becomes incapable of making decisions for themself.

A power of attorney can end for several reasons, such as when the principal revokes the agreement or dies, when a court invalidates it, or when the agent can no longer carry out the responsibilities outlined in the agreement. In the case of a married couple, the authorization may be invalidated if the principal and the agent divorce.

Someone who wants the power of attorney to remain in effect after their health deteriorates should sign a durable power of attorney (DPOA). This remains in force even if the person they're representing becomes mentally or physically incapacitated but it doesn't persist after the principal's death. The authority is also voided if the power of attorney isn't designated as durable and the client becomes mentally incapacitated.

There are many good reasons to make a power of attorney because it ensures that someone will look after your financial affairs if you become incapacitated. But signing a POA that grants broad authority to an agent is very much like signing a blank check.

Types of Powers of Attorney

A durable POA takes effect when the document is signed and continues in the case of incapacitation of the principal. A springing power of attorney comes into effect only if and when the principal becomes incapacitated. A power of attorney may also be limited to only medical matters, enabling the agent to make crucial decisions on behalf of an incapacitated person.

The two key types of POAs are financial and health care.

Health Care Power of Attorney (HCPOA)

The principal can sign a durable health care POA (HCPOA) if they want an agent to have the power to make health-related decisions for them. This document is also called a health care proxy . It outlines the principal’s consent to give the agent POA privileges in the event of an unfortunate medical condition. This POA kicks in when the principal can no longer make health-related decisions on their own.

Financial Power of Attorney

A financial POA allows an agent to manage the business and financial affairs of the principal, such as signing checks, filing tax returns, depositing Social Security checks , and managing investment accounts when and if the principal becomes unable to understand or make decisions.

The agent must carry out the principal’s wishes to the best of their ability, at least to the extent of what the agreement spells out as being the agent’s responsibility. A financial POA can give the agent a wide range of power over the principal's bank account, including the ability to make deposits and withdrawals, sign checks, and make or change beneficiary designations.

Financial POAs can be divided up into several categories.

General Power POA

This POA allows the agent to act on behalf of the principal in all matters as allowed by state law. The agent under such an agreement may be authorized to handle bank accounts, sign checks, sell property, manage assets, and file taxes for the principal.

Limited POA

A limited power of attorney gives the agent the power to act on behalf of the principal in specific matters or events.

It might explicitly state that the agent is only permitted to manage the principal's retirement accounts. This type of POA may be in effect for a specific period. The authorization might be effective only for two years if the principal will be out of the country for that length of time.

Durable Power of Attorney (DPOA)

A durable POA (DPOA) remains in control of certain legal, property, or financial matters that are specifically spelled out in the agreement even if and when the principal becomes mentally incapacitated. A DPOA can pay medical bills on behalf of the principal but the durable agent can't make decisions related to the principal's health, such as taking them off life support.

Springing Power of Attorney

The conditions for which a durable POA may become active are set up in a document called a "springing" power of attorney. A springing POA defines the kind of event or level of incapacitation that should occur before the DPOA springs into effect.

A power of attorney can remain dormant until a negative health occurrence activates it to a DPOA. A springing power of attorney should be very carefully worded to avoid any problems in identifying precisely when and if the triggering event has happened.

An individual who's appointed as the agent in a power of attorney is not necessarily an attorney. The person could be a trusted family member, friend, or acquaintance.

How to Set Up a Power of Attorney

You can buy or download a POA template but be sure it's for your state because requirements can differ. There's no standard POA form for all 50 states, although all states do accept some version of a durable power of attorney.

A few key powers cannot be delegated, including the right to make, amend, or revoke a will or contract a marriage in most states, although a handful of states do allow this. You can't delegate the power to vote but the guardian can request a ballot on behalf of the principal.

Some rules generally apply in all states and jurisdictions.

Put It in Writing

Some regions of the country accept oral POA grants but verbal instruction isn't a reliable substitute for spelling out the terms word-for-word on paper. Written clarity helps to avoid arguments and confusion later at a crucial time.

Use the Proper Format

Decide what powers you want to grant and prepare a POA that's specific to that desire. The POA must also satisfy the requirements of your state. Perform an Internet search or ask a local estate planning professional to help you find a form that will be accepted by a court of law in the state where you live. The best option is to seek the help of an attorney.

Delegate the Powers

A POA can be as broad or as limited as the principal wishes but each of the powers granted must be clear even if the principal grants the agent a general POA. The principal can't grant sweeping, nonspecific authority such as, “I delegate all things having to do with my life.”

Specify Durability

A POA terminates if the principal becomes incapacitated in most states. The only way an agent can keep their power if this happens is if the POA is written with an indication that it's durable. This designation makes it last for the principal's lifetime unless the principal revokes it.

Notarize the POA

Powers of attorney must be notarized in most states. It's potentially easier for the agent if a notary’s seal and signature are on the document even in states that don't require it.

File the POA

Some states require that specific kinds of POAs be filed with a court or government office before they can be made valid so look into the rules where you live. Ohio requires that any POA used to grant grandparents guardianship over a child must be filed with the juvenile court. It also requires that a POA that transfers real estate must be recorded by the county in which the property is located.

Not all powers of attorney must be formally recorded or filed but it's a standard practice for many estate planners and individuals who want to create a record that the document exists. File it with your state or county to be on the safe side.

You can start the process of establishing a power of attorney by locating a lawyer who specializes in family or estate law in your state. Legal services offices that are staffed with credentialed attorneys exist in virtually every part of the United States if attorney fees are more than you can afford. Visit the Legal Services Corporation's website and use the " Get Legal Help " search function. Clients who qualify will receive pro bono cost-free assistance.

Choosing an Agent

A POA grants immense ownership authority and responsibility. It's a matter of life and death in the case of a medical POA. You could find yourself facing financial privation or bankruptcy if you end up with a mishandled or abused durable POA. Choose your agent with the greatest care to ensure your wishes are carried out to the greatest extent possible.

It's critical to name someone who is both trustworthy and capable to serve as your agent. Any mistakes may be difficult to correct and there may be a danger of self-dealing depending on the extent of the powers you grant. An agent may have access to your bank accounts, the power to make gifts and transfer your funds, and the ability to sell your property.

Your agent can be any competent adult, including a professional such as an attorney, accountant, or banker. But they may also be a family member such as a spouse, an adult child, or another relative. Naming a family member as your agent saves the fees a professional would charge and may also keep confidential information about your finances and other private matters “in the family."

Naming Your Child As Your Agent

Parents who create POAs often choose their adult children to serve as their agents. The relative youth of the child is an advantage when the purpose of the POA is to relieve a parent of the burden of managing the details of financial and investment affairs or provide management for their affairs should they become incapacitated.

A spouse who is near the same age as the person creating the POA may come to suffer the same debilities that led the POA’s creator to establish the POA in the first place. A child who is honest, capable, and who respects the parent’s desires can be a good choice for an agent but there may be complications.

Parents may struggle with the decision of who to select if they have more than one child. The good news is that you can have multiple POAs naming separate agents and customize them for each child’s skill set, temperament, and ability to act on your behalf. Specific abilities of your children may make them best suited to take on particular roles in managing your affairs.

You can use limited POAs to give each child different, defined, and limited power over specific aspects of your finances:

• Managing everyday expenses of the family
• Receiving income from and paying expenses on real estate
• Controlling a financial portfolio
• Managing insurance and annuities
• Running a family’s small business

Choosing Multiple Agents

More than one agent can be named in a POA, either with the authority to act separately or they can be required to act jointly. Having two agents who are separately authorized to manage routine items can be a convenience if one becomes unavailable for some reason. Requiring two or more to agree on major actions like selling a house can ensure family agreement over major decisions.

But naming multiple agents can cause problems if disputes arise between them. An investment account may be effectively frozen if two agents are required to act jointly in managing it but they disagree as to how to do so. Be sure that your chosen agents not only have the skills for the task but personalities to cooperate.

A general POA enables the agent to act with the authority of the POA’s creator in all matters. A special POA can limit that authority to a specific subject, such as managing an investment account, or to a limited time when the creator of the POA is unavailable.

Maybe one of your agents is a busy financial expert who lives in a distant city and another works part-time and lives conveniently close by. You can have one POA that names the first to manage your investment portfolio and another that names the second to manage your routine daily expenses if necessary and pay your monthly bills.

Risks and Precautions

Periodically review and update the POAs you've created when and if family circumstances change. You can cancel a POA by simply writing a letter that identifies it and states that you're revoking it then delivering the letter to your former agent. Some states require such a letter to be notarized. It’s also a good idea to send copies to third parties with whom the agent may have acted on your behalf. Then create a new POA and deliver it to your new choice of an agent.

A power of attorney can provide you with both convenience and protection by giving a trusted individual the legal authority to act on your behalf and in your interests. Adult children who are both trustworthy and capable of accomplishing your wishes may make the best agents but don’t name a person simply because they're related to you.

Trusted professional advisors such as lawyers, accountants, and doctors can help you understand the wisdom and necessity of adopting POAs. You can do so gradually if you aren't comfortable granting broad powers all at once but don’t delay. There could be costly consequences because the grantor must be mentally competent to create a power of attorney.

It's too late to create a POA if you lose the capacity to manage your affairs. Court proceedings may be required at that point. It would become necessary for someone to go to court to ask to be named as your conservator or guardian, a process that may prove costly and slow. It could also be contested, leading to family conflicts.

Make sure the POA requires that the agent periodically report all actions taken to a trusted third party whom family members agree upon, such as the family’s lawyer or accountant. You can also name two agents and require they agree on major transactions, such as the sale of a home.

Nobody may have the right to take individual retirement account (IRA) distributions the parent needs for income, borrow funds to pay medical bills, or deal with the Internal Revenue Service (IRS) concerning the parent’s taxes.

Can Somebody With Power of Attorney Do Anything They Please?

No. The scope of legal authority that's granted by a POA is laid out when it's established. The person who is granted power of attorney has a legal fiduciary duty to make decisions that are in the best interests of the person they're representing.

Can Next of Kin Override a Power of Attorney?

No. Next of kin or other family members do not have any legal authority to override or nullify an existing power of attorney.

How Can I Revoke a Power of Attorney That I've Given to Someone?

Power of attorney can be terminated if you expressly revoke it. It may also have a set termination date or duration of time for which it's in force. A POA will also end if you become mentally incapacitated unless it is a durable power of attorney. All powers of attorney cease if you die.

Who Can I Name to Have Power of Attorney?

You can technically name anybody as your agent as long as it's done under your free will and you're mentally competent. It should be somebody trustworthy and capable, such as a spouse, close family member, or friend. You can also designate your lawyer to have a POA.

Creating a power of attorney and specifying how it will operate even if you lose your ability to think or function ensures that you'll have a plan in place for overseeing your financial affairs and health directives if and when you're unable to do so. Be sure to choose somebody you trust and who will be able to faithfully carry out their responsibilities on your behalf.

American Bar Association. " Power of Attorney ."

Connecticut General Assembly. " 2002-R-0094: Power of Attorney-Mental Capacity ."

American Bar Association. " Pick the Right Power of Attorney Instrument ."

Ohio Laws & Administrative Rules. " Section 3109.53 | Form of Power of Attorney for Residential Grandparent ."

Ohio Laws & Administrative Rules. " Section 1337.04 | Recording of Power of Attorney ."

Legal Services Corporation. " Pro Bono Innovation Fund ."

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Assignments, Disclaimers and Powers of Appointment

          Assignments, Disclaimers and Powers of Appointment can alter the distribution of a decedent’s estate.    

          First what is and who can make an assignment? A person who has a vested — legally enforceable — interest in a decedent’s estate can “assign” – i.e., transfer – part or all of their interest to another. Generally, an inheritance vests upon the decedent’s death.  An assignment is a gift by the assignor making the assignment to the assignee receiving the assigned interest.    Assignments create tax issues for both the assignor and assignee.   

          For example, consider an unmarried father who dies intestate — without a will or trust – and is survived by a son and a daughter — his heirs.  Prior to settling dad’s estate, the son decides to give his one-half share to his sister and signs and notarizes an assignment of inheritance rights.  The assignment is then filed with the Court.  Dad’s estate, less expenses and debts, is distributed entirely to the daughter. 

          If an interest in real property inherited from a parent is assigned then the parent child exclusion from reassessment — for local real property taxes — only applies to the interest(s) belonging to the child(ren) who do not assign their interest(s).  There is no reassessment exclusion for any transfers between siblings.

          Assignments, however, almost never apply to a beneficiary’s interests in a trust.  Usually, a trust prohibits beneficiaries from assigning their interest in the trust before distribution.  The anti-assignment provision protects undistributed trust assets from claims by a beneficiary’s creditors. 

          Next, disclaimers are used when a beneficiary, or heir, refuses to accept a gift or inheritance.  You cannot force someone to receive a gift or an inheritance.  To be valid disclaimers must satisfy the following requirements: be unconditional, be in writing, and be timely (i.e., generally, within nine months of the transfer), and, when real property is involved, also be filed with the county recorder where the real property lies.  Unlike assignments, the person disclaiming their interest cannot say who receives the disclaimed interest.  A disclaimer is not a gift by the person disclaiming.  Lastly, one cannot have accepted any benefits from the property being disclaimed, such as the income from an income producing asset. 

          The person disclaiming their gift or inheritance is treated as if they had predeceased the person who made the gift.  We see who is then entitled to inherit. 

          For example, a decedent’s trust leaves a share of the decedent’s trust estate to a named beneficiary and otherwise, if he does not survive to inherit, to the beneficiary’s descendants by right of representation.  The beneficiary survives and timely disclaims.  The beneficiary’s living descendants would then inherit by right of representation. 

          Unlike assignments and disclaimers, powers of appointment are created within a person’s estate planning, e.g., a trust or will, for future use.  A power of appointment allows the power holder to say who receives a gift/distribution from a trust or an estate.  The power of appointment is either a limited power that allows gifting to certain persons or is a general power that allows gifting to anyone at all, including the power holder, the power holder’s estate and the power holder’s creditors.  Powers of appointment are used for a variety of estate planning reasons. 

          For example, a husband’s and wife’s joint estate planning may give the spouse who survives a limited power of appointment over the deceased spouse’s separate trust estate.  The limited power of appointment might allow the deceased spouse’s estate to be divided equally or unequally amongst the deceased spouse’s children as the surviving spouse sees fit after the deceased spouse’s death.

          Anyone who wants to proceed with making an assignment, a disclaimer or exercise of a power of appointment should consult a qualified attorney.  There are tax and other issues to discuss and drafting requirements to these legal instruments that benefit from the expertise of a qualified attorney. 

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January 8, 2024 by Jean Kallmyr

Understanding Deed of Assignment

In the realm of legal transactions in Australia, a Deed of Assignment holds significant importance. This legal document serves as a powerful tool for the transfer of rights and obligations between parties. Whether in the context of real estate, intellectual property, or other contractual agreements, a Deed of Assignment plays a crucial role in facilitating the seamless transfer of assets.

Deed of Assignment

A Deed of Assignment is a legally binding document that allows one party, known as the assignor (the party relinquishing the rights, benefits, or obligations), to transfer specific rights, benefits, or obligations to another party, referred to as the assignee (the party receiving the assigned rights, benefits, or obligations).

This legal instrument is commonly employed when there is a need to assign contractual rights, such as in real estate transactions, business sale transactions, intellectual property transfers or the assignment of debts. The deed must be properly executed and delivered to be legally effective.

Key Clauses of Deed of Assignment

A clear and concise description of the intention to assign, the rights, benefits, or obligations being transferred should be outlined in the document.

In many assignments, there is a consideration involved, which refers to the value exchanged between the parties. This could be in the form of money, services, or any other agreed-upon consideration.

The assignor typically provides assurances that they have the legal right to transfer the specified rights and that these rights are free from any encumbrances, and the assignee normally guarantees to perform specific contractual obligations under the specified rights.

Covenants are promises made by one or both parties regarding their future actions. For example, the assignor may covenant that they will not interfere with the assigned rights after the transfer and the assignee covenants that it will take over the obligations of the assignor under a specific contract.

The indemnity clause outlines the responsibilities of the parties in case of any losses or liabilities arising from the assignment. For example, it specifies which party will bear the costs associated with legal challenges or disputes.

Common Uses in Australia

Real estate transactions.

Deeds of Assignment are commonly used in the transfer of property rights, for example, in the sale of off-the-plan properties or when a buyer wants to transfer their rights under a property contract to another party.

Intellectual Property

Artists, authors, or inventors may use Deeds of Assignment to transfer their intellectual property rights, such as trade marks, copyrights or patents, to another individual or entity.

Debt Assignment

Assignments of debts are also facilitated through Deeds of Assignment. This occurs when a creditor transfers their rights to collect a debt to another party.

Contractual Agreements

Businesses often use Deeds of Assignment to transfer contractual rights and obligations when there is a change in ownership or a need to delegate specific responsibilities, for example, the assignment of leases or supplier contracts.

The IP House Lawyers has assisted many of our clients in drafting, preparing and executing various forms of Deed of Assignment. Please contact us on the details below if you need any assistance in relation to drafting and preparing a Deed of Assignment.

For any further information or queries on the above content, please contact us.

Jean Kallmyr | Lawyer, The IP House Lawyers | t: 0435 799 831 | e: [email protected]

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Claire Darby | Managing Director/Lawyer, The IP House Lawyers | t: 0412 998 951 | e: [email protected]

The information and contents of this publication do not constitute any legal or financial advice. This publication is intended only for reference purposes for The IP House Lawyers’ clients and prospective clients.

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OVERVIEW OF A POWER OF ATTORNEY IN NIGERIA

ALL YOU NEED TO KNOW ABOUT A POWER OF ATTORNEY IN NIGERIA

REAL ESTATE AND PROPERTY LAW PRACTICE IN NIGERIA

CHAMAN LAW FIRM

5/11/2024 20 min read

MEANING AND NATURE OF A POWER OF ATTORNEY

A power of attorney is a document usually but not always necessarily under seal whereby a person (donor) authorizes another person (the donee) who is called his attorney to do in the stead of the donor anything which the donor can do lawfully spelt out in the power of attorney. in other words, is a formal legal instrument by which a person called the donor appoints the donee to perform certain lawful acts on behalf of the donor. ude v nwara, a power of attorney given to execute a deed must by a deed. see abina v farhat. power of attorney is created by deed when is under seal., a power of attorney is created by deed poll because it is created and executed by one party, which is the donor., features of a power of attorney, it is an instrument of delegation. ude v nwara, it does not transfer interest in land, it is usually executed by one party (donor). that is, it is not inter parties, power of attorney is generally revocable unless it is expressed to be irrevocable, no special mode of creation except it  authorises the attorney to execute a deed, a poa is not an instrument of transfer of title to land and cannot on its own and without more transfer valid title to land. ude v nwara;, nb: poa is strictly and exhaustively construed. see nba v iteogu. that is, on the question of the construction of a power of attorney, a power of attorney is strictly and exhaustively construed. see nba v. iteogu (2006) 13 nwlr (pt. 996) 216;, differences between power of attorney and contract for sale of land or conveyance:, 1. poa does not transfer interest in land, unlike conveyance/formal contract for sale of land, 2. poa is usually executed by one party, unlike conveyance/formal contract of sale, 3. poa need not be exchanged to be valid, while in contract of sale exchange is mandatory unless both parties are represented by the same solicitor., 4. consideration is not mandatory in poa, unlike contract for sale of land., 5. poa may not require governor's consent since no interest is transferred, while conveyance requires consent since it involves transfer of legal interest., note: a power of attorney may either be general or specific, particulars of information required todraft power of attorney:,             1. particulars of the donor.,             2. particulars of the donee,             3. particulars of the attesting witnesses,             4. particulars of the property involved,             5. purpose of the poa and the powers to be donated,             6. whether or not the poa is given for valuable consideration,             7. whether or not the of poa shall be irrevocable,             8. duration/period of the irrevocability,             9. status of the donor,             10. extent and scope of powers donated,             11. where the power of attorney is to be used., essentials/formalities of a power of attorney, 1. writing: it must be a written document which need not necessarily be under seal. unwritten poa cannot be attested or registered. writing removes it from all doubts as to the extent of powers donated. importance of it being in writing was emphasized in abubakar v waziri. (2008) 14 nwlr (pt. 1108) 507, 2. execution/ signing: the donor must execute the poa. with regards to execution, note the following:, execution by family head when family property is involved: a poa given in respect of family property must be executed by the family head with one of the donors. see ajamogun v oshunrinde. that is, where a power of attorney is to be given in respect of family property, the power must be granted by the family head either acting alone or together with other principal members as failure to obtain the concurrence of the family head render the poa void. see ajamogun v. oshunrinde, where a power of attorney has been properly executed in favour of an attorney to deal with family property, the attorney does not subsequently need the consent of the family head or principal members before he can validly sell the property. see ojo v. anibire (2004) all fwlr (pt. 214) 176 where it was held that where members of a family donate a power of attorney to a donee to deal with their family land, the donee does not subsequently need the consent of the family head or principal members before he can sell the land., illiterate jurat: where the donor is an illiterate the poa must be in line with illiterate protection act. failure to comply with the illiterate jurat renders the poa invalid. see gilbert ezeigwe v awawa awudu (2008) 11 nwlr (pt. 1097) 158, 3. seal: a poa by deed must be signed, sealed and delivered. where it is executed by an individual, the intention to seal was sufficient; but where the deed is executed by a corporate body, it must be under seal.  section 163 ea 2011, section 71 and 74 cama, section 98 pcl., 4. attestation: it is advisable but not compulsory to attest. when attested to by a judge, notary public, magistrate, it raises a presumption of due execution under section 150, e.a 201 1. attestation before a notary public is advisable when poa is to be used outside nigeria. see melwani v. five stars industries ltd (2002) all fwlr (pt 94) 31, 5. stamping and registration: where the land instrument registration law of a state defines poa as an instrument, it must be registered-- see uzoechi v alinor; akinbade v. elemosho. thus, registration of a poa depends on whether it is defined as a registrable instrument. see section 2 land instrument registration, where a power of attorney is a registrable instrument and it is not duly registered, such non-registration renders it inadmissible in evidence to prove title to land or matters pertaining to interest in land. see o jugbele v olasoji, it will not constitute notice to the whole world. it will lose priority., with regards to stamping; a poa attracts a fixed stamp duty. it does not attract an ad valorem duty., 6. governor's consent: where poa is used to alienate interest in land, it is registrable instrument. see s. 7(b) of state land law of lagos., uses of power of attorney, v  buying and selling land on behalf of the donor, v  collecting money on behalf of the donor, v  receiving rates, rents on behalf of the donor, v  prosecuting cases in court, except the defence in criminal cases. the accused cannot authorize another to stand for him., reasons for power of attorney, unavailability of the donor, ill-health or other physical impairment making it difficult for the donor to run his  affairs, where the expert skill of the donee is required, maybe required where a mortgage is by sub demise in ca states., secure interest of a purchaser pending the perfection of title of purchase., capacity of parties to a power of attorney, only legal persons can donate a poa or be appointed attorneys. see n ational bank of nig ltd v. korban brothers., the donor and donee must have legal capacity both at the time of the creation of the poa and all through the subsistence of the power as the capacity must span through the period of power of attorney., a power of attorney cannot be used to cure a legal disability suffered by the donor. thus, a person can only appoint an attorney to do, for and on his behalf, acts that he may himself lawfully do because a power of attorney or the appointment of an agent cannot be used to cure a legal disability suffered by the donor/principal, therefore, as a result of their legal disabilities, the following persons cannot grant a poa:, an insane person found to be so by a court, unincorporated entity - national bank (nig) ltd v. korban bros (nig) ltd., the following persons cannot be appointed as a donee, partnership firms, unincorporated entity, an insane person adjudged so by a court., therefore, bodies registered under part b of cama such as okwor & co etc cannot appoint or be appointed attorney as part b of cama does not confer legal personality. but okwor ltd etc can appoint or be appointed attorney because a body incorporated under part a of cama is a legal person., it is better to appoint attorneys by their names and it is so advised. this is good to avoid the situation in national bank of nigeria ltd v. korban brothers where the “manager, national bank of nigeria (ilorin branch)” was appointed an attorney., it is possible for two or more persons to come together, jointly and severally, as donors to appoint one or more persons as their attorneys. where two or more persons are appointed as attorneys by the same instrument, the donor should expressly state whether he is to be bound only by the joint acts of the donees or by the acts of any of the donees. he should also state what would happen in the event of the death of one of the donees, whether the other donee can continue to act., construction of a power of attorney, a power of attorney is strictly and exhaustively construed by the courts to ensure that the donee does not exceed the powers donated to him and act ultra vires. see nba v. iteogu . therefore, the authority conferred by a poa must be strictly adhered to., if the donee exercises the power in excess of the powers granted to him and outside the reasonable scope of his special and incidental powers, the donor will not be bound by it and he will not  be liable to third parties., the donee cannot also add to, vary or contradict the specific provision of the poa. see nba v iteogu;, in construing the general clause in a poa, the ejusdem generis rule will apply. see abu v kuyabana (2001) all fwlr (pt. 70) 1520. thus, the omnibus clause in a power of attorney does not confer any additional powers on the donee. it must be construed in terms of the specific powers already given as held in abina v farhat., precautionary measures to be taken, ·         ensure that the poa confers on the donee all powers necessary to achieve the object of the power donated,, ·         the poa should be drawn in such a way as to ensure that no difficulty will be encountered when dealing with third parties., revocation of power of attorney, there are three ways of revoking power of attorney. these are:, 1. express revocation : this can be in various ways depending on the type of power of attorney, if power of attorney is oral it can be revoked orally, in writing and by deed., if power of attorney is in writing, it can only be revoked in writing or deed, if the power of attorney is by deed, it can only be revoked by deed; abina v farhat; ojugbele v. olasoji, where there is an express revocation, the attorney’s authority does not cease and is not revoked until he receives a notice of revocation. thus, until the notice of revocation of the attorney’s authority is received by him, the attorney who acts pursuant to his power contained in the poa is not liable to the donor or to any third party, 2. implied revocation : a poa is said to be revoked by implication in situations where the donor makes it impossible for the power to be realised or exercised by the donee to the extent that the power becomes extinguished.  for instance, where the donor goes ahead to exercise the powers donated as in chime v. chime .in such instance, the poa will be revoked impliedly where the donor deals with the subject matter of the power in a manner that makes it impossible for the donee to exercise the powers. see chime v. chime (2001) 3 nwlr (pt. 701) 527;, revocation of a poa by implication is possible because the fact that a poa has been granted by a donor does not extinguish the right of the donor or prevent him from personally exercising the powers donated. see chime v. chime (2001) 3 nwlr (pt. 701) 527;, thus, both the donor and the donee can exercise the powers donated. if both the donor and the attorney exercised the power and had sold to different persons, the priority rule will govern it as the only issue that will arise is the priority in the competing sales. see amadi v. nsirim (2004) 17 nwlr (pt. 901) 111, however, if a donor grants another power of attorney in respect of the same subject matter, it cannot be taken to be an implied revocation of the original one. the subsequent grant of power of attorney is invalid. adegbokan v akinsanya., 3. revocation by operation of the law : it occurs in the following cases, death of the donor, insanity of the donor, bankruptcy of the donor, and other disability that would deny donor capacity, see uba v. registrar of titles, this is because a power of attorney cannot cure a legal disability of the donor, 4. revocation by renunciation: this is when the donee renounces the power granted to him, 5. nb: also power of attorney can be invalidated if fraud, duress, misrepresentation or undue influence is established. see agbo v. nwikolo, types of power of attorney, a power of attorney could either be general or specific. it is general when it is broadly stated to cover the issues relating to the subject matter. it is specific when it is given in respect of specific and particular acts to be done by the donee. in either case, it could be revocable or irrevocable, 1. revocable power of attorney : this is the power of attorney that can be revoked at any time, the various ways of revoking power of attorney are: express revocation, implied revocation and revocation by operation of law., 2. irrevocable power of attorney : a poa is generally revocable. however, there are three (3) statutory exceptions under which a poa could be irrevocable in order to curb injustice done on third party. they are:, a. where a power of attorney is given:, ü  for valuable consideration and/coupled with a grant/with an interest,, ü   and it is expressed in the instrument creating it to be irrevocable, then in favour of the purchaser, that power shall not be revoked by the donor either by anything done by him without the consent and concurrence of the donee or by the death, disability, or bankruptcy of the donor until the consideration or interest is realised. see section 8(1) ca and section 143(1)( i) pcl. lababedi v odulana., flowing from the above, any act done by the donee at any time in pursuance of the power shall be valid as if the donor had not revoked the power and as if the death, disability or bankruptcy of the donor had not happened. see section 143(1)(ii) pcl, also flowing from the above, the donee and the purchaser (third party) shall not, at any time, be prejudicially affected by notice of anything done by the donor without the consent and concurrence of the donee or of the death, disability or bankruptcy of the donor. see section 143(1)(iii) pcl, under this provision, the poa can only be revoked with the consent and concurrence of the attorney., note: a poa coupled with grant or an interest is irrevocable until the interest for which it is given is exhausted, and such remains irrevocable except with the concurrence of the donee, of the third parties affected by the exercise of power., duration : a poa expressed to be irrevocable for a fixed period, not exceeding one year, remains irrevocable for the period stated, whether or not it is given for valuable consideration.thus, in favour of purchaser, the power shall not be revoked during that fixed period of time either by anything done by the donor without the consent and concurrence of the donee or by the death, disability or bankruptcy of the donor. see section 9(1) ca and section 144(1)(i) pcl., flowing from the above, any act done by the donee during that fixed period of time in pursuance of the power shall be valid as if the donor had not revoked the power and as if the death, disability or bankruptcy of the donor had not happened. see section 144(1)(ii) pcl, also flowing from the above, the donee and the purchaser (third party) shall not, during that fixed period of time, be prejudicially affected by notice of anything done by the donor without the consent and concurrence of the donee or of the death, disability or bankruptcy of the donor. see section 144(1)(iii) pcl, the irrevocable power of attorney for a fixed period of time is not revoked by the means of revocation of power of attorney stated above. see lababedi v. odulana. when a power of attorney is made irrevocable for 12 months, at the expiration of 12 months, the power of attorney is not automatically revoked, but shall stand revocable and it can be revoked by any of the usual means of revocation . same rule applies to that coupled with interest. when a power of attorney made irrevocable for a period exceeding 12 months say 24 months, the 24 months would be construed as 12 months and it will stand revocable at the end of 12 months., further note: the poa irrevocable for a fixed period of time, usually 12 months is not automatically revoked at the expiration of 12 months unless it is revoked by any of the means of revocation. thus any act in favor of the purchaser done on the 13th month is valid., ·         a power of attorney coupled with an interest is irrevocable until the interest for which it was granted is realised. it can only be revoked with the consent and concurrence of the attorney., section 47 ca and 142(1) pcl, offer protection to a bonafide purchaser for value without notice. thus, a person doing any act in pursuance of a poa, shall not be liable in respect of the act by reason that before that act, the donor had died or become subject to disability or had revoked the power, if these facts was not at the time of exerting the powers known to the donee., the donee should further make a statutory declaration immediately before or  within three months after exercising such powers that he had not received any notice or information of the revocation of such power of attorney by death or otherwise. section 142(2) pcl., duties of a lawyer drafting power of attorney (poa), 1.      a solicitor drafting a poa should ensure that specific powers are expressly stated without ambiguity since such powers are construed strictly. in other words, a general or omnibus clause is usually construed along the ejusdem generis rule., investigate if there was a previous power of attorney., a solicitor acting for a purchaser relying on poa should investigate to ensure that the power has not been revoked by death, disabilities of the donor to the knowledge of the donee., a solicitor should follow his client's instruction strictly and account and report client's money promptly., a power of attorney not prepared by a solicitor should not be franked by him., a solicitor should not advice a clint to create a poa, rather than a conveyance to escape  section 22 of the lua., a solicitor who is a donee of the poa  should not in the same capacity draft the poa., formal parts of power of attorney, commencement, appointment clause, recital - optional, authority clause, irrevocable clause, testimonium, attestation, generally attestation is not mandatory in power of attorney. however attestation by a judge, notary public or magistrate is presumed to be duly executed - s. 150 evidence act. a power of attorney intended to be used outside the country should be attested to by a notary public for easy acceptance in the country of use. this is because a notary public has credit all over the world as held in hutcheon v manington. however non-attestation does not make the poa invalid. melwani v five star industry ltd., stamping and registration, generally power of attorney attracts a fixed stamp dut y of n50.00. whether or not a power of attorney is registrable depends on whether it qualifies as a registrable instrument under the land instrument registration law applicable to the state where it is used. in uzoechi v. alinnor upon objection to the non-registration of a power of attorney, the court held that it need not be registered because under the land instrument registration law of rivers state, it is not a registrable instrument . in lagos and abuja, it is a registrable instrument - s. 15 land instrument registration law of lagos. power of attorney attracts stamp duties under the stamp duties act. check the current law in lagos state., in lagos, a poa relating to a sub-lease of state lands or certificate of occupancy must have the consent of the governor. see 5(9)(b)(iii) of the lagos state land law., general principles of law regarding power of attorney, abina v. farhat, a power of attorney to execute a deed must be under a deed. in that case the donee had been granted power of attorney orally and he had executed a lease exceeding three years under deed. the court held the lease to be invalid., chime v. chime, the fact that a power of attorney was given by the donor of his power to alienate the property does not divest the donor of the power to deal with the property. the fact that a person has executed a power of attorney in favour of another, does not divest him of the power to deal with that same property. this case is instructive in the implied revocation of powers of attorney., ude v. nwara, a power of attorney is an instrument of delegation only and does not transfer the interest of the donor to the donee but only authorises the donee to transfer such interest., ojugbele v. olasoji: revocation of poa expressly, when a power of attorney is not registered then it is not admissible. that is, if the land instrument registration law of that particular state defines a power of attorney as a registrable instrument, then failure to register the said power of attorney will render it inadmissible in court., akingbade v elemosho., uzoechi v. alinnor, whether a power of attorney is a registrable instrument is dependent on the land instrument registration law of the various states. for instance, the state land law of lagos defines “instrument” to include powers of attorney. therefore, powers of attorney are registrable instruments in lagos. similarly, under section 3 of the land instrument registration law of northern nigeria as applicable in plateau state, a power of attorney is a registrable land instrument. by section 15 thereof, for such power of attorney to be relied on in court, it must be duly registered. it must be noted that only powers of attorney made by deed are registrable. however, such unregistered power of attorney can be pleaded and given in evidence in other cases not relating to or affecting the land which is the subject of the power of attorney. see also akinbade v. elemosho, ajamogun v. oshunrinde, the power of attorney not given or executed by the head of family or with his express consent is void and any act purported to be done under it is of no effect whatsoever. the family head must participate in the execution of a power of attorney in respect of family property either as sole donor or a co-donor with other principal members of the family., ezeigwe v. awudu, a power of attorney by an illiterate person must have an illiterate jurat. an irrevocable power of attorney is not a document conferring title to the property in issue on the donee. it would still be necessary for the donee to prove title to the property where title is in issue. indeed the existence of the irrevocable power of attorney is a clear evidence or confirmation of the fact that the title to the land in dispute resides in the donor of the power., the only document that can prove any passing of the title to the donee would be a conveyance or an assignment. in appellant's claim for declaration of title to land, he relied on an irrevocable power of attorney granted by the respondent in favour., sample draft of a power of attorney to execute a sub-lease [deed] irrevocable for six months ., by this power of attorney made this______ day of ____20___. i, chief charles chukwuma nkwoka of 31 afolabi aina street, allen ikeja, lagos (donor) appoint mr. peter okafor of 5, arepo road, arepo, ogun state (donee) to be my true and lawful attorney and in my name and on my behalf to do all or any of the following acts:, 1. to create a term of ten (10) years over my property, the block of four flats at 67, dare ojo street, arepo, ogun state, covered by certificate of occupancy no 87679 date 23/11/2009 and registered as 45/45/2098 in favour of bashir nuhu& sons limited whose registered office is at 45, nuhu close, off shagari way, arepo, ogun state., 2. to commence and conclude the transaction on my behalf and to sign all necessary documents in respect of the transaction with bashir nuhu & sons limited., 3. to collect from bashir nuhu& sons limited the  sum of n80 million, the sum being the agreed rent for the property for the first three years of the lease and to remit the money collected into my account less his fees, charges and commission as may be agreed between the two of us., and to do all things and to exercise all other powers as are necessary and incidental to the matters above as i may lawfully do., and i declare that this power of attorney shall be irrevocable for a period of six (6) months from the date of its execution., and i declare that in consideration of the sum of #19999 already paid by the donee to the donor (the receipt of which the donor acknowledges), this power of attorney shall be irrevocable, in witness of which i, the donor, has executed this power of attorney in the manner below the day and year first above written., signed, sealed and delivered by the within named donor, _________________________, chief charles chukwuma nkwoka, in the presence of, address………., occupation…….., signature……….., prepared by:, charles c. nkwoka, esq., legal practitioner/property consultant, chaman law firm,, 31, afolabi aina, street, allen, ikeja, lagos, [email protected], 08065553671, 08024200080, a draft by registered trustees, by this power of attorney made this ______day of______2013, we the registered trustees of alagbole progressive union of lagos, registered under part c of the companies and allied matters act cap c20 lfn, 2004 with registered office at 15, kano street, ikeja, lagos state (donor)of the one part appoint mr. frank roberts of 16, alkali street, kaduna, kaduna state (donee) of the other part to be our true and lawful attorney and in our name and on our behalf to do all or any of the following acts:, in witness of which the donor has executed this power of attorney in the manner below the day and year first above written., the common seal of the registered trustees of alagbole progressive union of lagos was affixed to this poa and it was duly delivered., in the presence of:, _________________                                                                          __________________, secretary/trustee                                                             trustee, a draft of the testimonium and execution clauses of sub-lease executed under power of attorney., in witness of which the parties have executed this deed in the manner below the day and year first above written:, signed, sealed and delivered by, __________________________________, the lawful attorney of chief charles chukwuma nkwoka (assignor) the sub-lessor by virtue of a power of attorney dated____ and registered as num _____page_____ vol _____ of the lands registry office at _____state., the common seal of bashir nuhu& sons limited has been affixed pursuant to a resolution dated ______and duly delivered., in the presence:, ________________                                                                            _________________, secretary                                                                                         director, power of attorney executed by husband and wife, by this power of attorney made this _____day of____2012, we mr. theo maimako (1) and mrschideramaimako (2), both of 63 kano street, ikeja, lagos state (donor) appoint mr. frank roberts of 16, alkali street, kaduna, kaduna state (donee) to be our true and lawful attorney and in our name and on our behalf to do all or any of the following acts:, in witness of which, we the donors have executed this power of attorney in the manner below the day and year first above written., signed, sealed and delivered,  by within named donors:, 1. ________________, mr. theo maimako, 2. _________________, mrs. chidera maimako, draft sample of concluding part of deed of assignment executed by attorney on behalf of donor, in witness of which the parties have executed this deed of assignment in the manner below on the date and year first above written, _____________________________, (lawful attorney of prof babatunde (the assignor) by virtue of power of attorney dated 09/09/2014 and registered as no 3 at page 7 in volume 2001 in the lands registry, asaba, delta state), in the presence of: name: _____________________________, address: __________________________, occupation: _______________________, signature: _________________________, note:  registry office in abuja is abuja geographic information system., written by:, chaman law firm team, email: info@[email protected] /[email protected], tel: 08065553671, 08024200080, for payment, account details:, zenith bank: 1218060909, practice areas, our lawyers, our gallery, get a c ertificate of occupancy (cofo), get governor's consent, property for sale, register a company, register a trademark, legalization of document, 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