Definition and legal basis of the prima facie power of attorney The prima facie power of attorney is a form of power of attorney developed by case law in which a person (the represented party) has not granted an express or actual power of attorney to another person (the representative), but the external circumstances give the impression that the representative has a power of attorney. Although not explicitly regulated by law, this form of power of attorney is based on the principles of good faith (Section 242 BGB) and the protection of bona fide legal transactions.

Requirements for a prima facie power of attorney The following requirements must be met for a prima facie power of attorney to exist:

• The representative regularly and repeatedly acts as an authorized representative vis-à-vis third parties over a longer period of time.
• The represented party has not issued an express power of attorney, but could have recognized and prevented this action by the representative if it had exercised due care.
• Based on the behavior of the representative, an objective observer (counterparty) could assume that a power of representation existed.

If these conditions are met, the represented party is treated as if they had actually granted a power of attorney; the legal transaction binds them accordingly (§§ 170 ff. BGB analogously).

The difference between a prima facie power of attorney and an acquiescence power of attorney is that in the case of an acquiescence power of attorney, the represented party is aware of the unauthorized representation and consciously tolerates it. In the case of a prima facie power of attorney, on the other hand, the represented party is unaware of the unauthorized action, but should have recognized and prevented it with reasonable care. Both types of power of attorney are exceptions to the principle that legal transactions without express or actual power of representation do not bind the represented party.

Legal consequences of a prima facie power of attorney If the requirements for a prima facie power of attorney are met, the represented party is bound vis-à-vis the business partner as if they had actually granted a power of attorney. The legal transaction is therefore concluded directly between the represented party and the business partner. The business partner is thus protected, as he was entitled to rely on the existence of a power of representation and this appears to be attributable to him.

Limits of the prima facie power of attorney The prima facie power of attorney has its limits where the represented party cannot be accused of any breach of duty or negligence. If the represented party has not caused his conduct through negligence and could not recognize objectively that the representative is acting without power of attorney, there is neither a prima facie nor an acquiescence power of attorney. In such cases, the legal transaction is suspended for lack of power of representation (Section 177 BGB) and the represented party is not automatically bound.

Practical examples of a prima facie power of attorney A typical example of a prima facie power of attorney is when an employee of a company regularly concludes legal transactions on behalf of their employer, even though they have not been expressly authorized to do so, but the employer could recognize and prevent this, but fails to do so. In this case, the business partner may assume that the employee is authorized based on the employee’s conduct, and the employer is bound by the contracts.

Significance of the prima facie power of attorney in legal transactions The prima facie power of attorney essentially serves to protect bona fide business transactions by ensuring that persons who justifiably rely on an apparent power of representation are not disadvantaged. At the same time, it requires represented parties to pay increased attention to the conduct of their employees or representatives in order to prevent unwanted legal ties.

Summary of the prima facie power of attorney In summary, the prima facie power of attorney is an important form of power of attorney developed by the courts that serves to protect legal transactions and is based on the principles of good faith. It ensures that persons who rely on an apparent power of representation are protected in their trust, provided that the represented party has negligently enabled this trust.