A power of attorney has three features:

• it is formed via a document or instrument that is formal as opposed to informal;

• it is designed to effect a relationship whereby one person represents another; and

• there may be limits to the scope of that representation.

References: G Del Pont, Powers of Attorney, 2nd ed, 2014, Lexis Nexis

Powers of attorney are governed by the laws of each state and territory in Australia. For example, a power of attorney that is made in NSW is governed by NSW law, whereas a power of attorney that is made in Queensland is governed by Queensland law.

The general rule is that a power of attorney must be registered if the attorney is empowered to deal with any interest in land. For example, in NSW, you must register your power of attorney if you intend to register a sale, mortgage, lease or other dealing affecting real estate with Land and Property Information. You will need to check the relevant Act for any registration requirements which are applicable to your jurisdiction.

Whether a power of attorney that is made in one jurisdiction is applicable in another jurisdiction depends upon the laws in that other jurisdiction. For example, an enduring power of attorney that is made in another state or territory is recognised in New South Wales, and an enduring power of attorney that is made in New South Wales is recognised in Queensland, Victoria and Western Australia.

A power of attorney is a legal document. Importantly, it is a form of agency. It confers authority only, and does not affect title, rights or obligations. An ordinary power of attorney, commonly referred to as a general power of attorney, is made by a person (the principal, or sometimes referred to as the donor) who gives another person (the attorney, or sometimes referred to as the donee) the power to make decisions regarding the principal's assets and financial affairs. This power can extend to buying, selling, leasing or mortgaging the principal's real property. The power does not extend to the right to make decisions about the principal's lifestyle, medical treatment or welfare, these decisions can be covered by an enduring power of attorney. It is useful to note here that, generally, an ordinary power of attorney terminates when the principal loses capacity, whereas an enduring power of attorney continues after the principal loses capacity. See Gibbons v Wright .

The power, however widely drafted, should not be construed as authorising the attorney to deal with the assets or property of the principal for the attorney's own benefit, unless it is expressed that the attorney is specifically authorised to do so. See Tobin v Broadbent .

In Yaktine v Perpetual Trustees Victoria Ltd (at [64]–[65]) per Young J, (where a son forged a power of attorney for his parents in order to secure borrowing on the family home), it was noted that “the whole point of a power of attorney is that people deal with the donee and do not consult the donor. People must expect to be able to treat donees of powers of attorney as prima facie having authority to do what they have to do”. To this, it is useful to note here that Young J added this guidance for legal practitioners — “… especially for solicitors, red lights should flash when certain factors exhibit themselves, one red light flashes when one can see that the donor of the power of attorney is to receive no benefit at all from a transaction yet the donee is to receive a considerable benefit. One can rationalise that this is because it is a family dealing, but a prudent solicitor when he or she sees the red light, makes enquiries. Furthermore, a prudent solicitor is extremely careful about documents to which he or she puts his or her signature and professional reputation and takes precautions against misleading anyone else.” This case shows that a court could find legal practitioners liable for damages for losses suffered by their clients if they fail to act prudently in order to protect their client's interests.

An ordinary power of attorney terminates if for any reason the principal loses the capacity to manage his or her own affairs, such as becoming mentally incapacitated because illness (for example, due to dementia) or disability (for example, following a stroke). An enduring power of attorney will continue to have effect after the principal has lost capacity to self-manage. It is for this reason that ordinary powers of attorney are used for commercial transactions to give someone specific authority in financial matters and for a limited period of time.

Generally, a power of attorney can be revoked by deed, a form provided by the relevant government department or a surrender of the instrument signed by the attorney. It is recommended that a revocation is registered where the power of attorney has been registered.

At common law, a power of attorney is void unless the principal had the requisite mental capacity at the time of executing the power of attorney.

An attorney who loses mental capacity cannot exercise a power under a power of attorney.

A principal can appoint more than one attorney, who is able to act jointly or severally, depending on the terms of the appointment. Appointment of joint attorneys will mean that the authority is terminated on the death or incapacity of one of the attorneys.

The formal requirements are different for ordinary and enduring powers of attorney and vary among the jurisdictions. In general, an ordinary power of attorney has less formal requirements because the principal’s signature only needs to be witnessed by one person over the age of 18 provided that the witness is not the attorney.

See Powers of attorney.