In practice, termination of authorization agreements (power of attorney) are increasingly common. Individuals or legal entities often cannot personally participate in every transaction or legal relationship, and therefore delegate authority to another person or organization to act on their behalf. However, during the performance of such agreements, many circumstances may face potential troubles causing the continuation of authorization agreements impossible. So, under what conditions can an authorization agreement be terminated? NPLAW provides an in-depth explanation below.
I. Current practice of authorization agreements
With the rapid development of the economy, civil and commercial transactions have grown significantly. In most cases, these transactions are not executed directly by the legal representative of an organization but by an appointed individual or entity. Consequently, the execution of authorization agreements has become highly prevalent.
Its widespread use has contributed to gradual improvements to Vietnam’s legal framework governing authorization agreements. However, certain regulatory and procedural difficulties remain, requiring careful attention during execution and termination.
II. Understanding termination of authorization agreements
1. Definition of an authorization agreement
Under Article 562 of the Civil Code 2015, an authorization agreement (power of attorney) is an arrangement between parties whereby a party (an authorized party) is obligated to perform certain tasks on behalf of the other party (an authorizing party). The authorizing party only has to pay remuneration if there is an agreement or regulations by the Law.
2. Meaning of termination of authorization agreements
Termination of an authorization agreement means ending of all rights and obligations established under the agreement. Upon termination, the authorized party is no longer obliged to perform the delegated tasks, and the authorizing party cannot request further performance.
III. Legal grounds for termination of authorization agreements
1. Grounds for termination
Pursuant to Article 422 of the Civil Code 2015, an authorization agreement (power of attorney) may terminate under the following circumstances:
- Expiration of the agreed term.
- As provided in Article 563, the term of the agreement is determined by the parties or by law. If not specified, the validity period is one (1) year from the date of execution.
- Completion of delegated tasks.
- The authorized party completes assigned work and delivers the results to the authorizing party.
- Termination by mutual consent.
- Both parties agree to terminate the agreement before its expiration.
- Unilateral termination.
- Either party exercises its right to unilaterally terminate as provided by law.
- Death of one of the parties.
- Because the agreement is personal in nature, the death of either the authorized party or the authorizing results in the termination of the arrangement.
- Impossibility of performance.
- The delegated task can no longer be performed due to the disappearance or destruction of the subject matter of the agreement.
- Substantial change of circumstances.
- The agreement may terminate when material changes make performance impractical or impossible.
- Other cases as prescribed by law.
2. Rights and obligations of the Parties
a. The authorizing party
The authorizing party’s rights and obligations are regulated, as follows:
- Obligations (Article 567 of the Civil Code 2015):
+ Providing necessary information, documents, and resources for the authorized party to perform the delegated tasks;
+ Being responsible for commitments made by the authorized party within the scope of authority;
+ Paying reasonable expenses and paying agreed remuneration, if applicable.
- Rights (Article 568 of the Civil Code 2015):
+ Requesting full updates on the performance of delegated tasks;
+ Demanding the return of assets or benefits derived from the performance of the agreement;
+ Seeking compensation if the authorized party breaches obligations.
b. The authorized party
The authorized party’s rights and obligations are regulated, as follows:
- Obligations (Article 565 of the Civil Code 2015):
+ Performing tasks as delegated and providing updates to the authorizing party;
+ Notifying third parties about the scope and term of the authorization;
+Safeguarding and properly managing materials and resources provided;
+ Maintaining confidentiality of information obtained during the execution of duties;
+ Returning assets and any resulting benefits to the authorizing party;
+ Compensating for damages caused by breach of obligations.
- Rights (Article 566 of the Civil Code 2015):
+ Requesting necessary information, documents, and resources;
+ Being paid for reasonable expenses and receiving agreed remuneration.
IV. Common questions regarding termination of authorization agreements
1. Can an authorization agreement be unilaterally terminated?
Under Article 569 of the Civil Code 2015, either party may unilaterally terminate the agreement, subject to the conditions provided by law.
2. Can the authorized party terminate a non-remunerated agreement?
Under Clause 2, Article 569, if the agreement is non-remunerated, the authorized party may terminate at any time but must provide the authorizing party with a reasonable prior notice.
3. Is unilateral termination of an authorization agreement on a housing management without 30 days’ notice a violation?
Under Article 158 of the Housing Law 2014:
- If the agreement involves management fees, the authorizing party is not required to give a notice 30 days in advance but must pay the authorized party for completed work and compensate for damages, if any.
- If the agreement does not involve fees, the authorizing party must give a notice at least in 30 days, unless otherwise agreed. Failure to make a notice will constitute a legal violation.
4. Does the authorization agreement automatically terminate upon completion of the delegated task?
The authorization agreement automatically will terminate upon completion of the delegated task, but only if the parties have explicitly agreed to such a condition. Otherwise, the agreement remains valid until the agreed term expires or is terminated by other legal grounds.
5. Is the authorizing party required to pay remuneration if terminating early?
Based on Clause 1, Article 569, if the agreement is remunerated, the authorizing party may terminate at any time but must fully pay remuneration corresponding to the work completed and compensate for any damages.
V. Importance of termination of authorization agreements
The termination of authorization agreements requires a clear understanding of applicable laws and contractual terms. If the parties lack expertise, engaging legal services is highly advisable to avoid procedural risks that could result in financial loss or legal liability.
