Power of Attorney in Norwegian Law: Types, Establishment, and Legal Effect

Introduction

A power of attorney is a central aspect of agency law, where one person (the agent) acts on behalf of another (the principal) with legally binding effect in relation to a third party. This article reviews the various types of powers of attorney in Norwegian law, how they are established, what limits they have, and the legal consequences that result from the agency relationship.

What is a Power of Attorney?

A power of attorney is characterized by an individual (the agent) entering into an agreement with a third party on behalf of the principal, resulting in the agreement being considered made between the principal and the third party. The agent remains outside the contractual relationship. An agent thus acts in the name of and on account of the principal.

Types of Power of Attorney in Norwegian Law

Main Division: Independent and Non-Independent Powers of Attorney

Norwegian law operates with two main types of agency relationships:

1. Independent Powers of Attorney: These powers are visible to outsiders other than the principal and the agent, typically including the contracting party.

2. Non-Independent Powers of Attorney: These powers are expressed only in the internal relationship between the principal and the agent.

Independent Powers of Attorney

Independent powers of attorney can be divided into two subgroups:

Position-Based Powers of Attorney

A position-based power of attorney arises when the agent, through an agreement with the principal, holds a position that according to law or custom grants authority to act on behalf of the principal, cf. the Contract Act § 10 second paragraph.

Three conditions must be met:

• The agent must hold a position

• The position must be held based on an agreement with the principal

• The position, according to law or custom, must confer authority to act on behalf of the principal

Examples of position-based powers of attorney may include a company manager, office manager, or sales clerk.

Express Powers of Attorney

Express powers of attorney are independent powers not based on position. They are established when the principal has expressed the agency relationship outwardly. These can be further divided into:

• § 13 Powers of Attorney: Powers established by declaration directly to a specified third party

• § 14 Powers of Attorney: Powers established by public announcement

• § 16 Powers of Attorney: Written powers intended to be shown to third parties

Non-Independent Powers of Attorney

The non-independent power of attorney is often referred to as a mandate power of attorney or § 18 power of attorney, after the provision in the Contract Act governing the revocation of such powers. This type of power is legally founded on a disposition from the principal to the agent that is not evident externally to the contracting party.

Other Types of Power of Attorney

Tolerance Power of Attorney

A tolerance power is characterized by the principal remaining passive regarding an act by someone potentially considered the agent, where the act is likely to give the third party valid grounds to believe the person in question has authority.

Combination Power of Attorney

A combination power of attorney covers cases where different circumstances jointly can provide the third party legitimate expectations that they have dealt with an authorized person. In Norwegian law, it is established that a power of attorney can arise on an unwritten basis in the form of a combination power of attorney, cf. Rt 2011 p. 410 (Optimogården).

Future Power of Attorney

A special type of power of attorney is the future power of attorney, regulated in the Guardianship Act Chapter 10. This is a power that grants one or more individuals the right to represent the principal after they are no longer able to care for their interests due to mental illness or significantly impaired health.

Establishment of Power of Attorney

The rules of the Contract Act on power of attorney primarily concern the legal effects, not the establishment. Nevertheless, it is possible to deduce how power is established based on the Contract Act's rules on revocation and general principles:

Mandate Power of Attorney

Established by the principal's declaration to the agent. There are no formal requirements, and the power can be both oral and written.

Express Power of Attorney

• § 13 Power of Attorney: Established by declaration directly to a specific third party

• § 14 Power of Attorney: Established by public announcement

• § 16 Power of Attorney: Established by issuing a written power intended to be shown to third parties

Position-Based Power of Attorney

Established by the agent occupying a position that, according to law or custom, grants authority to act on behalf of the principal.

Tolerance and Combination Powers of Attorney

Here, the element of will is withdrawn or subdued. Instead, there is an element of culpa sanction justifying the agency relationship – the principal must endure that an agency relationship is deemed established because they were called to act differently if they wished to avoid being bound.

Limits and Restrictions of Power of Attorney

For the principal to be bound, the following conditions must be met:

1. A valid agency relationship is established

2. The power has not been revoked or otherwise terminated

3. The agent's agreement falls within the power's scope

Rights and Authorization

A central distinction in the doctrine of powers of attorney is between the agent's rights and authorization:

• Rights: What the agent is entitled to do in relation to the principal

• Authorization: What the agent is entitled to do in relation to third parties

With independent powers, the agent may be authorized beyond their rights. This occurs when the power is limited by an internal instruction. A contracting party acting in good faith may invoke the agent's authorization and have rights enforced even if the agent acted contrary to the limitation, cf. Contract Act § 11 first paragraph.

With non-independent powers, rights and authorization coincide – the principal is not bound if the agent acted contrary to the internal limitation, even if the contracting party is reasonably good faith, cf. § 11 second paragraph.

The Scope of Powers with Position-Based Powers of Attorney

In position-based powers, the scope of authority is determined by what "law or custom" assigns to the holder of the position. What is decisive is not the authority the agent actually has in each case, but what normally follows from such a position.

Termination of Power of Attorney

A power of attorney can be freely revoked unless it has been made irrevocable. The starting point is that power should and can be revoked in the same way it was given, cf. § 12 first paragraph:

• A power of attorney document is revoked by returning it

• A position-based power is revoked by removing the agent from the position

• A message directly to the third party will always suffice as revocation

Power of attorney can also cease upon the principal's death or insolvency, cf. §§ 21 and 23, or if the principal becomes incapable of making legally binding dispositions due to mental illness or significantly impaired health, cf. § 22.

Liability for Excess of Power

If the principal is not bound because the agent acted without authority or beyond its limits, the agent may be liable for damages for the loss suffered by the third party, cf. Contract Act § 25.

The main rule is that the liability is objective, but the provision contains comprehensive limitations, so an agent is rarely liable where there is nothing to blame him for.

Conclusion

The institution of powers of attorney is a key tool in Norwegian contract law enabling efficient contract formation and representation. Understanding the various types of powers of attorney, their limits, and legal effects is important to avoid ambiguities and disputes when entering agreements through intermediaries.