Appearance of power of representation

If a person enters into a legal act on behalf of another while he is not authorised to represent, the other is in principle not bound by that legal act. This is different if the counterparty was entitled to trust that there was authority on the basis of which the legal representation was valid. We then speak of an appearance of power of representation.

In this blog, we discuss the Supreme Court ruling of 14 October 2022 (ECLI:NL:HR:2022:1456). The Supreme Court confirms previous case law on imputation of appearance of power of representation.

Power of attorney and appearance of power of representation

Power of attorney is the authority granted by a principal to another, the proxy, to perform legal acts in his name (Article 3:60(1) of the Civil Code). If a legal act has been performed in the name of another, if the counterparty has assumed on the basis of a statement or conduct of that other party and under the given circumstances could reasonably assume that an adequate power of attorney had been granted, the inaccuracy of this assumption cannot be invoked against the counterparty (Article 3:61 paragraph 2 of the Civil Code).

The counterparty’s reliance on the power of representation of the (pseudo)proxy may have arisen from a statement or conduct of the (pseudo)principal. The conduct may also consist of a non-doing and may also take place after the conclusion of the legal act (HR 1 March 1968, ECLI:NL:HR:1968:AB6642, HR 12 January 2001, ECLI:NL:HR:2001:AA9429 and HR 24 April 2015, ECLI:NL:HR:2015:1119, our blog of 5 June 2015). In addition, an appearance of power of representation can also arise if the circumstances giving rise to it should be at the risk of the pseudo-principal (HR 19 February 2010, ECLI :NL:HR:2010:BK7671). This risk principle does not go so far as to leave room for its application also in cases where the trust created vis-à-vis the other party is based solely on statements or conduct of the unauthorised person (HR 3 February 2017, ECLI:NL:HR:2017:142).

Supreme Court ruling of 14 October 2022

The case that led to the Supreme Court judgment of 14 October 2022(ECLI:NL:HR:2022:1456) involved the question of whether a health insurer and a healthcare institution had entered into a healthcare agreement. The healthcare institution believed that they had not; the healthcare insurer believed that they had. On behalf of the healthcare institution, the agreement had been signed by a person who was not authorised to represent the healthcare institution. The court ruled in favour of the health insurer, the court of appeal ruled in favour of the healthcare institution. The court ruled that there was no power of attorney or appearance of power of attorney. The health insurer appealed in cassation. The health insurer complains, successfully, that the court of appeal rejected the health insurer’s reliance on the appearance of power of representation with insufficient comprehensible reasons. The Supreme Court rules as follows (translated).

“3.2 If the court of appeal considered it decisive for the dismissal of the reliance on the appearance of power of representation that both directors of [the health care institution] did not in any event create this appearance vis-à-vis [the health care insurer], on the ground that the contact with [the health care insurer] took place exclusively through [the health care institution’s general affairs manager], then it erred in law. Attribution of the appearance of granting a power of attorney to [the health care institution] may also be justified in the event that [the health care insurer] legitimately relied on the granting of a power of attorney on the basis of facts and circumstances concerning [the health care institution] and for the risk of [the health care institution], from which, according to common opinion, such an appearance of power of representation may be inferred. Such facts and circumstances may also exist in the event of a failure to act, including allowing a particular situation to continue.“

This is in line with previous Supreme Court case law.

Wieringa Lawyers

Legal acts performed by a person who is not authorised to represent may also be binding. This depends on the circumstances of the case. Do you have questions about power of attorney or apparent power of representation? Feel free to contact us. We will be happy to assist you!

For a more general overview of the main topics in contracting, please refer to the Contract Law Series.

Questions?