Third party mandate power of attorney Power of

Third party mandate- power of attorney Power of attorney is a mandate given by a person authorizing some other person(s) to act on his/her behalf either for a specific transaction or a series of transaction or in respect of all his lawful transactions. The one giving the authority(mandate) is referred to as the Principal, Donor or Grantor.

• The one to whom the authority(mandate) is given is the Agent, Attorney, Donee or Grantee. • Why is a power of attorney given? It is given when the Principal or Grantor is in temporary incapacity or permanent incapacity. • A power of attorney must be expressed in a written document and must given under as seal. • The content of a power of attorney include; – full name of the Grantor and the attorney(s)

– address of the grantor and the attorney(s) – the reason for the authority –clauses either as follows: Specific clauses with limits General or omnibus clauses Ratification clauses Time limit clauses for which power of attorney is valid.

Rules relating to power of attorney • An attorney can not delegate his power unless there has been expressed provision for such. • Upon the death of the donor or one of the donees the power of attorney is terminated unless provision is made for the rest to continue. • As an attorney is an agent, it is not necessary for him to have full contractual capacity. E. g. a minor can be appointed as an attorney.

• The donee has no right to take action against the bank in case the bank wrongly dishonours a cheque which has been signed by him.

• Who can be an attorney? The Grantor has the right to choose any one He/She wishes. However, an attorney has a position of trust and should be someone the Grantor is confident will act responsibly on his/her behalf, and who has the necessary skills to carry out the tasks required of an attorney.

The following indicates who you can appoint as an attorney: • A person the Grantor has a blood relation with and whom he/she trust. • Non-relative whom you trust • A professional • Can also be a firm • A minor whom you trust It is worth noting that an individual/firm that has been declared bankrupt cannot act as an attorney.

Termination of power of attorney • A power of attorney may come to an end under any of following conditions: • Express revocation by the donor • Express revocation by the attorney • Operation of the law under the following conditions: - death, incapacity or bankruptcy of the donor - death, incapacity or bankruptcy of the attorney • When the period provided for the power has expired • When the purpose for which the power was given has been completed • By implication: donor return from abroad, recover from incapacitation

INDEMNITIES/BONDS/ GUARANTEE • It is a written instrument issued by a banker to accept the primary liability of it’s customers obligations to a third party. • If the obligation is not fulfilled, the guarantor undertakes to pay sum of money to the contractor as a compensation. The compensation can range from 1% to 100% of the contract value. • It is therefore a contingent liability to the banker. • Banks in order to reduce the risk associated often asked it’s customer to sign a counter- indemnity, which authorises the bank to debit his account with any amount paid under the bond.

Parties to bond/guarantee - exporter/seller or contractor: supply the goods as detailed in the contract. importer/ buyer/ beneficiary: He the isperson whose favour the guarantee is issued.

CONDITIONS THAT CALL FOR BONDS • A. Financial Indemnities or Bonds for contractors. • Example of financial indemnities include: advanced payment bonds, tender bonds, performance bonds, warranty bonds etc. If the contractor fails to meet contractual obligations, then the beneficiary can look to the banks for compensation under such a bonds.

• Types of financial indemnities/ bonds: 1. Bid or Tender Bonds. -Issued before the contract is signed 2. Performance Bond: To guarantee that the goods or services will be performed or produced according to the required standard in the contract and a stated penalty is payable if they are not. -issued after the tender guarantee is cancelled

• Advance payment bond: This is a variation on a performance bond and it guarantees the refund of any advance payment made by the buyer or awarder of the contract if goods supply or services rendered are unsatisfactory. • -issued in favour of the buyer/ to the one who awards the contract. -often used when a commercial transaction require a down payment on signing the contract.

• Warrantee or maintenance bond. This bond undertakes that the exporter or the contractor will maintain the equipment for a period of time. • Retention Bond. This enables retentions monies which would otherwise be held by the buyer beyond the completion of the contract, to released earlier. • This bond guarantees the return to the buyer of this retention monies in the event of non performance of post completion obligations by the contractor or the exporter.

• Conditional Bond and Unconditional Bonds: Any of the various types of bonds/guarantee can be conditional or unconditional. It is normally the buyer and the laws in his country that specifies which will be in operation. • Unconditional Bonds: These are also known as ‘on demand’ bonds and they can be called at the sole discretion of the buyer whether or not the exporter has fulfill the contractual obligation. • bank must pay if it is called upon to do so.

• Conditional bonds sub-divided into two parts. • i. Conditional bonds requiring documentary evidence; these give the exporter some form of protection. Payment can only be called for by the importer against the production of a specified document such as a certificates of award by an independent arbitrator. • Ii. Conditional bonds not requiring documentary evidence: These are a little better than ‘on-demand’ bond from the exporter’s point of view. Such bonds often specify that payment must be made in the event of default or failure on the part of the contractor to perform his obligations under the contract. This terminology is so vague that banks are often obliged to pay on a simple ‘on-demand’ claim made against them.

1. Inspect the indemnity or bond to establish the extent of the liability to be entered into by the bank and whether payment there under is conditional(i. e. definite proof of lost is required. The latter are invariably on-demand indemnities or bond where the bank must pay up on-demand when called to do so by the indemnity or bond. The claimant need give no reason as to why it is being called. 2. Assessment of customer’s background: Consider the credit worthiness or trust worthiness of the customer. 3. Consider taking security to support the counter indemnity.

4. Forward the indemnity to head office for the necessary action to be taken i. e. for signature. 5. When the indemnity has been returned, Head Office will also provide counter indemnity for signature by the customer. 6. Write to the customer and ask him to call at the branch or head office to execute the counter indemnity. Where the indemnity is to be given at the request of a limited liability company , the bank must ensure that the activity undertaken etc. is covered within the company’s articles and also that the company can give counter indemnities. Execution must be completed in accordance with any special requirement laid down in the company’s articles. • 7. After signature, the counter indemnity will be retained by the bank and the indemnity released to the customer. • 8. The Charge relating to the given of thi sservice should be debited to the customer’s account.

• Advantages of counter indemnity to the banks 1. A counter indemnity is taken in order to establish the bank’s right to an immediate claim against the customer, should the person indemnified claim against the bank. Thus the bank will be able to exercise its rights even before it gives notice to its customer that a claim has been made upon it. The taken of a counter indemnity is particularly necessary where the beneficiary has been issued with an unconditional ‘on-demand’ indemnity or bond. • 2. As the counter indemnity specifically refers to and (usually) contains a copy of the indemnity or bond given, there can be no argument as to the bank’s right. • 3. Clauses will (or can) be included, particularly in relation of bonds, given the bank an immediate right of set-off over account, also liens over items in the bank’s hands and even items in safe-keeping. Thus, if a bank needs to act speedily to protect its position, it can do so.

Circumstance under which a banker will request indemnity from its customer • 1. Small estate (i. e. small credit balances) The administration Act 63 and Legislative Instrument No. 1515 allows banks to release credit balance on a deceased customer’s account without production of probate provided the balance is not more than Ghc. 100. In this case the bank will request from the personal representative of the customer to undertake an indemnity before paying the money to him. • Bank may allow a close relative to of the insane customer to operate the customer’s a/c where the monies are only to be used for “necessaries”. The relation however should be prepared to provide the bank with suitable indemnity. • Lost certificates of deposit • Presenting foreign cheque for collection. • Lost Bank drafts

APPROPRIATION • Definition • Appropriation in general is the act of setting aside some money for a specific purpose. • In banking, appropriation is the choice of applying a particular deposit to a particular debit. • WHY APPROPRIATION • if several debts are outstanding between the same debtor and creditor and the debtor makes payment which is insufficient to discharge all the debts, it is important to establish which debts should be discharged.

• ORDER OF APPROPRIATION-RIGHTS OF APPROPRIATION • the debtor has first choice • the creditor, if the debtor does not exercise his right • rule in clayton’s case applies if neither the debtor nor creditor appropriates.

• Where a customer has 2 or more accounts with the same bank and he, for example pays money in and indicates which account is to be credited. e. g. no 1 debit/no. 2 debit and pays money which is insufficient to meet the whole of the debits. • Where the customer has 1 account and he pays money into it as well as draws cheques on it. e. g. a customer pays into a credit account and expressly states that this is to meet a specified cheque of his own. Appropriation will settle the issue of which payment the deposit relates to. • Implied conduct-e. g. if the debtor owes his creditor gh¢ 140 and gh 200 and pays his creditor gh 200 by implication he wishes this debt to be discharged. Marryatts v. white (1879).

SET-OFF • It is a legal right to a bank to combine two account (setoff, )or consolidation or combination of account to take into account any sum owing to him by the customer in order to know the next position to obtain an overall picture • Arises when the customer has more than one account with the bank (with the same branches or separate branches). • REASONS FOR SET-OFF • (i) to decide to pay a cheque • (ii) On the happening of certain event e. g. death, mental incapacity Garnishee order • General Rules • 1 usual practice is for a banker to ask the account holder to sign a letter of set- off. • 2 In the absence of such a signed letter, a banker will look to common law in order to establish the right of set off.

• Common Law Right –Set-Off The right of set-off can only be exercise when these requirements are met: • (a) Ascertain sums • The debt must be definite sum of money ie not mere claims of uncertain amount. • (b) Between the Same Parties • A bank can only set – off account where the same person or people hold both accounts. Uttamchandi v. central bank of India (1989). • Exception • credit balance on a sole account can be combined with a debit balance on a joint account to which he is a party but not vice versa.

• (c) Already Due ie a debt not yet due for payment by the customer cannot be set –off by the bank against his immediate liability. Jeffryers V. Agra and Masterman’s bank (1866). • Again the claims must have materialized (not yet matured) • d) In the same right (i. e. in the same name) • Apersonal debt of a customer to the bank cannot be set off against a credit balance on a trust account of which he is trustee. R v. Gross Exparte Kingston.

TYPES OF SITUATIONS WHERE SET OFF ARISES • Set-off may arise in 2 different occasions • 1. Automatic set off where the normal relationship of the bank and customer still continues. • NORMAL RELATIONSHIP • This varies according to whether the customer has • i) Two current accounts -one in debit the other in credit • ii) A current and a deposit account • iii) A current and a loan account.

• 2. Automatic right of set off upon the happening of certain events, it is recognised that there is a statutory or common law right to set of all accounts. Examples of when there is an automatic right of set off. • Upon the bankruptcy, mental incapacity or death of a customer. • Upon the winding of a company or the winding of a partnership. • Upon the receipt of a garnishee order or summons. This is mandatory. • Upon the receipt of notice that a customer has assigned his credit balance(s).

BANK ACCOUNTS WHICH MAY BE SET OFF • It recognises that there is a right of set off between: • a) A customer’s credit balance and a debit balance on current account. • b) A customer’s credit balance on his private account(s) and a debit balance on joint or partnership account(s) where joint and several liabilities have been obtained. • c) A customer’s credit balance(s) on a current account and a loan account (but only after reasonable notice has been given). • d) Current accounts can be combined even though they are held at different branches of the same bank. The accounts may be combined without notice to the customer. garnett v. mckewan(1872), Barclays bank ltd v. okenarhe(1966). • e) Overdrawn balance on current and deposit account of the customer can be set off, but only after customers attention is drawn to the situation and there is no response to regularize the deficit.