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The Invalidity of a Sale Power of Attorney Issued to Oneself or a Third Party Without a Specific Price

The power of attorney (POA) is established when an agent is obligated to perform a legal act for his principal, with the latter putting some or all of his property at the agent’s disposal in order to authorize him to manage it within the limits assigned to him.

There are two main types of power of attorney (PoA) documents; A general PoA that does not specify a specific type of legal work and can include administrative affairs, and any disposition actions required by the administration.

The second type is a private PoA, in which the agent is assigned a specific legal task, and has no capacity other than that specified in the PoA. Within this agency relationship, the agent carries out a specific act of management or disposal, and it may deal with both actions at the same time. It is also solely concerned with matters of sale and purchase, approval, arbitration, and taking a legal oath on behalf of someone.

Despite this, sometimes a general power of attorney can be issued for a specific purpose, such as signing lease contracts for companies, or signing sales contracts (either as the buyer or seller). In this case, the agent must not exceed the limits of the PoA terms, otherwise, it may be deemed legally ineffective. 

In all cases, classifying the power of attorney as ‘general’ or ‘private’, is of no substantive importance, however, the text within it is, since the validity of a PoA depends on the terms and wording within it.

Accordingly, if the price element is obligatory in the sale contract, its absence leads to the nullity of the contract as a whole. Similarly, a power of attorney to sell to oneself or to a third party will also not be valid without specifying a  price that has been agreed upon by the parties or at least has the ability to be identified.

As for POAs that are issued to banks when selling to oneself or third-parties as a guarantee of indebtedness, these shall not be taken into consideration without a preliminary sale contract being drawn up in which it is proven that the buyer has paid the price to the seller and that this price is nonrefundable. 

Herein we refer to one of the cases in which the Court of Cassation ruled on the invalidity of a registered sale contract since this was done by proxy, and without the price being mentioned.

On the ground of this ruling, the court said that the client had disputed over the sale and the price and that the agency he has entered into is in fact a guarantee of the fulfillment of his indebtedness to the bank, and not a license to sell.

However, under this agency, the latter sold the disputed apartment to himself by contract,  for a far cheaper price, that was not expressly or implicitly agreed upon in the power of attorney. This in turn invalidates the contract since it did not include the element of ‘a specific price’ necessary for a legally valid sale.

To conclude, the aim of this article is to highlight that the sale contract must specify the price explicitly or implicitly in order for the sale to be valid.

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Written By

Maher Iskander - Managing Partner / Noor Mahdy - Attorney at Law

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