Definition and function of representation (Section 164 BGB) Representation enables a person (representative) to conclude legal transactions with direct effect for and against another person (the represented party). Pursuant to Section 164 (1) BGB, the legal effect of the declaration is directly with the represented party without the latter having to be personally involved. Representation fulfills an important function in legal transactions in that it allows the acting party to structure legal transactions efficiently and flexibly without each legal transaction holder having to act personally.

Requirements for effective representation Three basic requirements must be met for effective representation to exist:

1. Representative‘s own declaration of intent: The representative must make his own declaration of intent and may not merely forward another person’s declaration (no mere messenger).
2. Obviousness (acting on behalf of another person): In accordance with the principle of disclosure (Section 164 (1) sentence 2 BGB), the representative must act clearly recognizably on behalf of the represented party so that the contractual partner can recognize with whom the legal transaction is to be concluded.
3. Power of representation: The representative requires a power of representation, which can either be provided for by law (e.g. parents for their minor children in accordance with § 1629 BGB) or granted by power of attorney (§§ 166, 167 BGB).

Granting and effect of the power of attorney (Sections 167 et seq. BGB) The legal power of representation is usually granted by granting a power of attorney. According to Section 167 BGB, a power of attorney can be granted both to the representative (internal power of attorney) and to the third party (external power of attorney). According to Section 171 BGB, a power of attorney granted internally becomes effective vis-à-vis third parties if it is made known to the third party by presentation or in some other way. The power of attorney defines the scope and limits of the power of representation and thus enables clearly defined representation.

Representation without power of representation (Sections 177, 179 BGB) If the representative acts without effective power of representation, the legal transaction is initially suspended (Section 177 BGB). The represented party can subsequently make this legal transaction effective through express approval. If the represented party refuses approval, the representative is liable to the contractual partner either for performance or damages in accordance with Section 179 BGB, unless the contractual partner knew that the representative was acting without power of representation.

Special forms: The so-called acquiescence and prima facie powers of attorney are of particular importance, in which the represented party can be bound even without the express granting of a power of attorney. An acquiescence power of attorney exists if the represented party knows that someone is acting on their behalf without a power of attorney, but tacitly tolerates this. In the case of prima facie authority, the represented party is unaware of the representative’s actions, but could have recognized and prevented them with due diligence. In both cases, the represented party must accept responsibility for the representative’s actions so that the legal transaction is binding for them.

Representation in the company: Prokura and power of attorney (§§ 48 ff. HGB) Special forms of representation play an important role in business life. Authorized signatories and authorized agents are typical representatives of companies. The power of attorney (§§ 48 ff. HGB) gives the authorized signatory comprehensive power of representation, which, however, cannot be limited in the external relationship. The power of attorney (Section 54 HGB), on the other hand, has a more limited scope and can be restricted to a greater extent. Both instruments enable companies to act flexibly and efficiently.

Practical significance and protection against abuse Proxy representation makes legal transactions considerably easier by enabling persons to have legal transactions carried out by representatives without having to be present in person. At the same time, clear rules on the granting and scope of the power of representation are essential in order to prevent abuse and ensure legal certainty. The precise requirements for disclosure and power of representation serve in particular to protect the contracting parties from unexpected legal consequences.

Conclusion on proxy representation in legal transactions Overall, proxy representation is a key legal institution that makes a decisive contribution to flexibility and efficiency in legal transactions. The detailed legal structure guarantees both the protection of the parties involved against abuse and a transparent and reliable basis for legal transactions.