Solution for Business Law 3rd Edition Chapter 7, Problem 1

by Nickolas James
128 Solutions 13 Chapters 45848 Studied ISBN: 9780730305743 Business Law 5 (1)

Chapter 7, Problem 1 : 1.Johnny’s elderly grandmother, Pam, has recently moved into...

1.Johnny’s elderly grandmother, Pam, has recently moved into a nursing home. She finds

it difficult to leave the home to attend to her banking and other business affairs. She has

asked Johnny to look after her affairs on her behalf. What steps should Pam and Johnnytake to formalise Johnny’s appointment?


Step-By-Step Solution

See Business Law p338.

Pam should appoint Johnny as her agent using a power of attorney. There are two types of power of attorney: a general power of attorney and an enduring power of attorney.A general power of attorney authorises the agent to act on behalf of the principal. However, a power of attorney is a contract between the principal and the agent and as such a general power of attorney will automatically terminate by operation of law if, for example, one of the parties dies, becomes bankrupt or loses the intellectual capacity to contract.

Given Pam’s age and circumstances it would be more appropriate for Johnny to be appointed using an enduring power of attorney. Unlike a general power of attorney, an enduring power of attorney does not automatically lapse if the principal loses intellectual capacity. An enduring power of attorney is sometimes called an ‘irrevocable power of attorney’ or a ‘living will’. In some jurisdictions an agent under an enduring power of attorney can even make decisions about medical treatment on behalf of the principal.


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