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Agency Without Authority
Table of Contents
The article “Agency Without Authority” (Unauthorised Representation), drafted by MGC Legal team, has been published.
As a rule, a legal transaction has legal effects only on the person who does that transaction. On the contrary, in some situations, due to a substantive or a legal disqualification, it may be not possible for some to do legal transactions or else can ask for someone to do the transaction for themselves. In these situations, the transaction is done by a representative. Representation is that the representative can do transactions on behalf of their appointer and their appointers account without having any legal effect or result belonging to them. This legal term is regulated in articles between 40 to 48 in the Turkish Code of Obligations. The authority that the representative has to do legal transactions on behalf of the account of the appointer is called a power of attorney. Power of attorney is accepted to have the authority to do legal translations and be a part of the appointer legal capacity.
Everyone who has the capacity to act, which means that they can do legal transactions, has the right to appoint themselves a representative. Power of attorney is given with a declaration of intent concluded by the appointer by itself. That’s why power of attorney is the key element of the representation relationship. Therefore, it is impossible to talk about a representation relationship with a regular power of attorney. As mentioned before, the representative gains power of attorney by the declaration of intent that the appointer will give by themselves. Representatives will gain power of attorney as this declaration of intent enters their legal interest. For this reason, it is enough that the declaration of the appointer reaches the representative’s jurisdiction area. In a case like this, the representor doesn’t have to know that they have a power of attorney or consent.
As a rule, a legal transaction that gives power of attorney is not attached to any formal requirements. A power of attorney can be given verbally or written. According to the dominant view, the declaration of content that gives power of attorney is not subject to any formal requirements in the doctrine. Power of attorney can be disclosed by document given to a representative as well as a verbal or written statement or even can be declared in the newspaper. What is important in terms of power of attorney is that the appointer’s will of authorisation has to enter the legal interest of the representative.
II) Unauthorized Representation
For the most part, there is no definition given in the articles that regulate unauthorised representation. The aforementioned articles generally focus on the effects and results of unauthorised representation. In return, there are also regulations about the legal nature and situations that can give rise to unauthorised representation. Due to this situation, it’s only possible to conclude with the help of articles that regulate representation relationships, other regulations and doctrines.
In doctrine, unauthorised representation is when there isn’t a declaration of intent or the authorisation is restricted or removed, but the representative takes legal action on behalf of someone else by exceeding their authority. A representative who does not have a valid representation authority is also called an “unauthorised representative”. The term unauthorised representation is regulated between articles 46 and 48 in the Turkish code of obligation No 6098.
According to the relevant provisions;
Article 46; “If a person makes a legal action as a representative, although he is not authorised, this action binds the represented person only if they approve. The other party with whom the unauthorised representative is dealing may request the representative to notify whether it will approve this legal transaction within a reasonable time. If the transaction is not approved within this period, the other party is freed from being bound by this transaction.”
Article 47; “In case the representative does not expressly or implicitly approve the legal transaction, the unauthorised representative may be asked to compensate for the damage arising from the invalidity of this transaction. However, if the unauthorised representative proves that the other party knew or should have known that he was unauthorised at the time of the transaction, he cannot be asked to compensate for the damage. If fairness requires, other damages may also be sought from the faulty unauthorised agent. Rights arising from unjust enrichment are reserved.”
B) Terms of Unauthorized Representation
In order to talk about the existence of unauthorised representation in a concrete case, some terms need to be met.
Making a Valid Transaction Between Unauthorized Representative and Third Party
There should be a legal transaction between the representative and the represented to discuss a concrete case of unauthorised representation. In articles 40 48 of the Turkish Code of Obligations, the representation relationship has been regulated by taking representation into account. In order for the direct representation to be valid and to make a legal transaction, the representative must explain to the third party that he is acting on behalf of the represented. Conversely, in indirect representation, the representative acts on their behalf and not on behalf of the represented. However, in such a case, they have to take a separate legal action in terms of the internal relationship of the representative and the person being represented. For a legal action to be valid, the person making it must have the necessary authority. In this respect, in order for the representative’s declaration of intent to legal action to be valid, they must have the authority to represent.
C) Forms of Unauthorized Representation
aa) Not Granting Representation Authorization to the Representative
If the representative has never been authorised by the represented at the time of the legal action, the legal action will be invalid with absolute nullity. Although it is not possible to limit the cases where the power of representation is not given at all, the absence of the power of representation in practice generally occurs in the following ways;
aaa) Invalidity of Elements Required for Representation Authorization
The represented person cannot perform transactions through a representative that he cannot legally do alone. However, in order to be authorised to represent, the person being represented must have the legal capacity to act. In this sense, if the representative is a limitedly incapacitated person, they can appoint a representative alone for the transactions they can do without the permission of their legal representative. However, naturally, it is impossible for a legally incapacitated person to appoint a representative. If there is a defect in the consent of representation, the legal action made by the representative based on this authority does not bind the represented. In addition, if a collusive transaction gives the power of representation, the power of representation is also invalid. Likewise, if the power of representation is against morality, it is void like any other legal action.
bbb) Deception of Third Party by Unauthorized Agent
The deception of the representative is the act of acting on behalf of the so-called represented, even though he is in no way qualified to represent or has been dismissed. Here, the unauthorised representative acts as a representative, although he does not have the authority to represent. Such a transaction will be subject to the provisions of the Turkish Code of Obligations, Article 526 and the following concerning negotiorum gestio. In the related work of TUNCOMAG, “Giving undue confidence to the third party by not explaining that the unauthorised representative does not really have the authority to represent, means a violation of the obligations arising from a culpa in contrahendo contract negotiations and the unauthorised representative is held liable for breach of debt.” includes these statements. As it can be understood, deception of the third party by the representative constitutes one of the cases of unauthorised representation.
ccc) Giving Representation Authorization After Legal Transaction
Sometimes, the representative, who is not authorised to represent, may have made a legal transaction with the third party, although the represented does not give the authority to represent. In such a case, the fact that the represented gives the authority to the representative later does not make the legal action valid. The reason is that the authority given later does not show the approval in the conclusion of the contract.
ddd) Taking Legal Action on Behalf of Someone Else
The main purpose of power of attorney is to act on behalf of someone else. For this reason, the contract’s validity depends on the representative’s notification to the third party, as he is acting on behalf of the represented while taking legal action. Because in this case, the representative carries out the legal action using someone else’s name. On the other hand, in indirect representation, the representative makes the contract with the third party on their behalf and then transfers it to the represented with another contract.
Representatives Exceeding or Abusing Their Authority
aa) Representative Exceeding Authority
The legal action of the representative who exceeds the limits of representation determined by the represented is subject to the provisions of unauthorised representation in the exceeded parts. However, when the representative makes a contract by exceeding the limits of their authority, the transactions made by the representative while remaining within the specified limits are binding on the represented. In fact, there is no need to take a separate legal action for this.
bb) Representative acting Contrary to Instructions Given
The authority of representation given to the representative by the represented is given for the representative to use when acting on their behalf. After that, the orders given to the representative by the represented are called instructions. According to the dominant view in the doctrine, the instructions are based on internal relations in representation. On the other hand, the instruction plays an important role in determining or limiting the scope of representation authority.
Considering the practice, almost every instruction results in the limitation of representation authority. Therefore, the representative’s violation of the instructions constitutes a direct violation of the authority of representation. Therefore, the action of the agent acting against the instructions will not bind the represented. Because this legal transaction made by the representative will be subject to the provisions of unauthorised representation; On the other hand, the opinion expressed by the representative in terms of internal relations with the representative and the opinion expressed by the representative to the third party may not coincide. In these cases, provided that the third party is in good faith, the representative is responsible for the legal action taken by the representative.
cc) Granting General Representation Authorization in Cases Requiring Special Representation
Representation authority is divided into two; general and special representative authority in terms of the scope of the authority given. The representative can be given the authority to represent in general, or it can be given specifically to execute some legal transactions.
In general representation authority, the representative can, as a rule, take legal action within the limits of the law without being subject to any limitations. However, unlike the general representative authority, the representative can use the special representative authority only for the transactions included in the representative authority. For this reason, in cases where the representative needs to receive special authority, the legal transactions made by the representative based on the general representative authority, although he does not receive this authority, are subject to the provisions of unauthorised representation.
dd) Only One of the Representatives Performs the Transaction In Representation Together
The person represented can delegate the power of representation to only one person. In this case, there will be only a sole representation relationship. On the other hand, if the representative has given the authority of representation to more than one person, there is a joint representation relationship.
The person represented in the joint representation relationship must appoint more than one representative to realise the legal transaction. These representatives must act together for the transaction to have consequences in the legal life. However, if the representatives do not act together, and each of them carries out the legal action alone, as, in the case of sole representation, the transaction will again be subject to the provisions of unauthorised representation.
ee) Transaction of the Representatives by Themselves
In some cases, when making a contract, a representative may act on their behalf as both the representative of the represented and the counterparty to the contract. It is necessary to look at the representative’s will in such cases. If the representative has been given the authority to represent only one person, the transaction will be invalid. However, if the representative’s transaction will not harm the representative, the representative will be able to make such a transaction. Likewise, if the representative has allowed the representative to make a contract with themselves within the limits of the authority of representation, the transaction will bind the represented.
ff) Representatives Representing Both Sides of The Agreement
According to the dominant view in the doctrine, a representative will be able to act as the representative of both parties when concluding a contract. This is called “double representation” in doctrine. In a dual representation relationship, the representative must act objectively and not solely in one party’s interest. In order for a double representation relationship to exist in a legal relationship, the authority on this issue must be given in the form of special permission. Except for transactions that are not permitted and are not exempt, the provisions of unauthorised representation will apply if the representative contracts as the representative of both parties.
gg) Abuse of Representative’s Power of Representation
Since the representative acts on behalf of the represented, he must act in accordance with the interests of the represented when making a legal action. If the representative does not act in the representative’s best interest, it clearly means that he is abusing their authority to represent.
In practice, the abuse of authority by the representative usually occurs in two ways. The first of these; the second one is a fraudulent agreement; It will be using the power of representation against the interests of the represented.
A fraudulent agreement is defined as the realisation of legal action by the representative and the third party by agreeing against the representative. Conversely, there will be a second form of abuse, which is milder than fraudulent agreement. Indeed, in the latter case, the representative consciously or unconsciously uses their power of representation in a way that clearly contradicts the interests of the represented. It does not matter whether the representative has acted faulty (whether intentionally or negligently) in such a case.
Termination of Representation Authority
Despite the expiration of the representative authority granted to the representative, the representative may act as if they have a validly given representative authority. In such a case, the transaction will be subject to the provisions of unauthorised representation.
This situation generally occurs in two ways in practice. First, the unauthorised representative may act without knowing that their representative authority has expired. In the second case, the representative makes a legal transaction with the third party, even though he knows that their authority to represent has ended.
Suppose the notification of the end of the representative authority reaches the representative after the conclusion of the contract. In that case, the contract between the third party and the representative will be valid. According to a decision of the Supreme Court of Appeals; “As it is clearly emphasised in Turkish Code of Obligations Articles 37 and 396, the dismissal must be conveyed to the representative in order for the authority of representation to end, for the attorney to become an unauthorised representative and for their actions to be deemed invalid for this reason. By going here, it is considered that the authority to represent the representative or third parties is withdrawn and that this authority continues unless it is delivered per the method.” stated that he accepted this view.
Consent in Unauthorized Representation
As a rule, the legal transaction made by the unauthorised representative without the authority to represent does not bind the represented, but in order for the rights and debts arising from the legal transaction to belong to the representative, the transaction must be authorised later. The representative may authorise the legal action taken by the representative without the representative’s authority. In such a case, the results of the representation relationship take place from the date of the transaction, with retrospective effect. On the other hand, the legal transactions made by the representative will be considered suspended until the representative gives permission or until the situation and conditions are understood. This is because the element of authorisation that will prevent the emergence of the terms and consequences of the contract made by the unauthorised representative with the third party is missing, and such a transaction is suspended.
The represented person gives the authorisation with a unilateral and required statement. The authorisation will have its consequences from the moment it enters the area of the representative or the third person. However, in exceptional cases, the legal transactions made by the person without the power of representation are binding on the represented, even though they are not approved by the represented. At the forefront of these are the informing of the third parties about the existence of the power of representation by the represented and the actions taken by the third parties in good faith. In such a case, the operation binds the represented.
III) Terms and Consequences of Unauthorized Representation
When the terms and results of the unauthorised representation are examined, it is seen that the representative is divided into two according to whether the unauthorised representative permits the legal action or not.
A) The Represented’s Failure to Verify the Legal Transaction
Since the legal transactions between the unauthorised representative and the third party do not meet the validity conditions, they are incomplete. For this reason, as stated before, the transactions in question are suspended and void until the representative gives permission. On the other hand, the third party will be bound by the legal transaction in question until the representative explicitly or implicitly rejects it. Suppose the third party does not authorise the transaction or does not make any declaration of intent during the adherence period. In that case, the third party will be freed from being bound by the transaction at the end of the period.
Third-Party Compensation Request in Case of Failure to Grant Consent to the Contract
As a result of the representative not giving consent to the contract, the contract made by the third party with the unauthorised representative will become invalid. For this reason, the third party may demand compensation for the negative damages under the provision of Article 47 of the Turkish Code of Obligations.
In article 47/1 of the Turkish Code of Obligations, “In case the representative does not approve the contract explicitly or implicitly, the compensation of the damage arising from the invalidity of this transaction may be requested from the unauthorised representative.” provision is included.
Even if the unauthorised representative does not know that he does not have the authority to represent and is not faulty in this regard, he will be obliged to pay for this damage suffered by the third party. Suppose the unauthorised representative is found to be defective in the conclusion of the contract and requires fairness. In that case, the judge can determine the compensation to be paid by the unauthorised representative in a way that exceeds the negative damage suffered by the third party. On the other hand, if the unauthorised representative is negligent, the judge may decide to pay the representative for the positive damage that will arise due to the contract’s invalidity. The negligence here is that the unauthorised representative knowingly or knowingly does not show due diligence when they should have known.
In a decision of the Supreme Court, “Since the defendant has drawn up the contract on behalf of his mother and that there is no power of attorney from the defendant’s mother, it must be accepted that he signed this contract as a representative. Pursuant to article 39 of the Turkish Code of Obligations, if the person who has signed as a representative is denied, either explicitly or implicitly, a lawsuit is filed against the person who assumes the title of representative for the compensation of the damage resulting from the invalidity of the contract. However, if this person proves that the other party is aware that he does not have the authority or that he should be knowledgeable, there is no room for a lawsuit. In the concrete case, the plaintiff did not prove the existence of the ratification with legal evidence. However, the plaintiff is a limited liability company and is a merchant. The defendant can’t request the defendant by having made a contract with the defendant’s mother on 20.02.1999 before and then having made the contract with the defendant, knowing that the defendant’s mother is not an authorised representative without a power of attorney.” He reached the same legal conclusion with his statements.
The unauthorised representative and the third party can claim what they have given to each other as a result of the legal transaction through a lawsuit. However, if, as a result of the legal action taken due to the contract’s invalidity, the possession of the transferred property has not passed to the other party, it is taken back with a remuneration lawsuit pursuant to article 683/II of the Turkish Civil Code. On the other hand, if the ownership of the goods has passed to the other party, following the provisions of the Turkish Code of Obligations Article 77 and the following unjust enrichment, a fee must be requested.
Deprivation of a Third Person Who Doesn’t Have Good Faith from Seeking Compensation
In some cases, the third party may know or need to know that the unauthorised representative has exceeded their authority to take legal action. For example, a third party may think that the unauthorised representative is authorised due to a wrong belief, contrary to the principle of trust. In such a case, the legal action taken by the representative is subject to the provision of suspension and invalidity, according to article 46 of the Turkish Code of Obligations. Suppose the third party knows or should know that he is not authorised in the legal action taken by the unauthorised representative. In that case, the law definitively abolishes the right of third parties who are not in good faith to seek compensation. Because in such a case, the third person who has made a contract with the representative is in a position to know in advance the danger of the representative not giving consent to this legal transaction and taking this risk. For this reason, in the mentioned case, the third party must consent to the resulting damages. Here, even if the unauthorised representative is at fault, the third party will definitely lose the right to claim compensation. The burden of proving that the third party is not in good faith will be on the unauthorised representative.
B) Approval of the Represented to the Contract
The representative may authorise the legal action within the given period. In this case, the transaction becomes valid retroactively from the date it was made and has consequences because the ratification given after the conclusion of the contract is retroactive.
In this regard, when the decision of the Supreme Court of Appeals General Assembly dated 22.09.2010 and numbered 2010/13414 and Decision numbered 2010/412 is examined; “In the absence of the necessary representative authority for direct representation to be in question, the subsequent licensing of the representative will complete this deficiency. And with this authorisation, the relation of representation between the representative and the represented is proven. If there is no power of representation and the person being represented does not give consent, the legal action is absolutely null and void. Even if the represented and the representative are not bound by the legal transaction, it is clear that the representative who deals with the unauthorised representation is obliged to cover the damages of the third party.”
On the same issue, when the decision of the 19th Civil Chamber of the Court of Cassation, dated 30.06.2011, numbered 2011/8772 and decision numbered 2011/8805, is examined; “If the transaction made by the unauthorised representative is subsequently approved, the transaction becomes valid. In the concrete case, although a power of attorney given to the attorney objecting to the proceedings on behalf of the defendant debtor company does not contain the signature of the defendant company official, a power of attorney given to the same attorney was signed by the defendant company officials, and the objection to the proceedings was validated.” statements are included.
When the representative gives consent in unauthorised representation, the representative is excluded from the ongoing transaction between the represented and the third party. After the expiry of the period, the fact that the representative has declared that he has permitted the transaction will not make the invalid transaction valid. If the representative wants such a transaction to be valid, the legal transaction requested to be established with the third party must be made again.
C) Delay Compensation that a Third Party May Request from an Unauthorized Representative
The representative can compensate for the damage suffered by the third party from the unauthorised representative due to the delay in the authorisation. In order for the third party to compensate for the damage incurred as a result of the delay, the representative doesn’t need to be at fault for the delay of the period. The third party will only be entitled to claim compensation from the defective unauthorised representative.
D) Time Bar
In unauthorised representation, legal action will be established between the unauthorised representative and the third party, even if it is invalid. For this reason, a ten-year statute of limitations can be applied to the lawsuits filed by the third party due to the damage suffered. (Turkish Code of Obligations, article 146). Because all lawsuits between the unauthorised representative and the third party are subject to a ten-year-long stop of limitations as per article 146 of the Turkish Code of Obligations, the long stop of limitations will start from the moment the representative refuses to give consent to the contract made by the unauthorised representative.
IV) Jurisdictions On Approval Of Process In Unauthorized Representation
As mentioned above, many decisions are made on different dates in this regard. To mention a few of these decisions;
- In the decision numbered 2017/1462 and Decision No. 2019/334 of the 11th Civil Chamber of the Court of Cassation; ”In the case that is the subject of the lawsuit, considering both the audit report of the bank inspection board and the statements and petitions of the parties that are reflected in the file later, the written instruction or telephone record was not received at the beginning, and the plaintiff’s approval was obtained on 26.01.2010, and in the face of this situation, the Turkish With this approval of the party approving the transaction made under Article 38 of the Code of Obligations, as if the authority given to the transaction in question at the beginning is full and sound, it is bound with this transaction, and the rights and responsibilities arising from the transaction will belong to the person represented. It is a novelty right stating that the representative subsequently accepted the transaction performed without his authorisation, and since the transaction made by the unauthorised representative will become valid if the authorisation is given, it is stated that the plaintiff gave consent to the transaction by signing the instruction regarding the transactions subject to the lawsuit on 19.01.2010 date Considering that the defendant would not be responsible for the damage caused by the fact that the causal link between the fault and the damage in the defendant bank was cut with the consent of the plaintiff, it was necessary to decide on the rejection of the case, but the provision in written form based on an erroneous assessment was not correct, necessitating reversal.” statements are included.
- In the decision of the 15th Civil Chamber of the Court of Cassation with the main number 2018/4430 and the decision numbered 2019/873; “In Article 40 of the Turkish Code of Obligations numbered 6098, it is regulated that the receivables and debts arising from the contract made by an authorised representative with another person will belong to that person. Accordingly, the signer is personally responsible for the contract if he is not authorised. In the ongoing article 46 of the same Law, it is stated that if a person has taken legal action on behalf of another without being authorised, the represented person will not be a creditor or debtor unless he gives permission. Even if this representative is unauthorised, the legal action will be valid from the beginning and binding on the represented, in case the representative gives permission later or adopts the legal action taken on his behalf.”
- In the decision of the 15th Civil Chamber of the Court of Cassation with Base Number 2017/2611 and Decision Number 2018/198; “With the contract, it is regulated that the receivables and debts arising from the contract made by an authorised representative with another person will belong to that person, in Article 32 of the Code of Obligations No. 818, which is in force at the time the work is done and must be applied in the concrete case. Accordingly, the signer is personally responsible for the contract if he is not authorised. In the ongoing article 38 of the same Law, it is stated that if a person has taken legal action on behalf of another without being authorised, the represented person will not be a creditor or debtor unless he gives permission. Even if this representative is unauthorised, the legal action will be valid from the beginning and binding on the represented, in case the representative gives permission later or adopts the legal action taken on his behalf.”
- In the decision of the 19th Civil Chamber of the Court of Cassation No. 2016/14483, Decision No. 2017/7887; “In the event that the representative approves the contract made by an unauthorised person pursuant to Article 38 of the Code of Obligations, that contract becomes binding on the representative and the rights and obligations arising from the contract are transferred to the representative. The consent given by the representative to the transaction or contract made by the unauthorised representative is a one-sided declaration of will that does not depend on the form and needs to be managed and can be either explicit or implicit. Even if the defendant did not sign the contract, even if an unauthorised person signed it, if he made a legal action using that contract, he would be deemed to have approved the unauthorised representation, and the contract would be binding on him.”
There are representatives, represented and third parties in the representation institution. Based on the representative’s authority has validly given to the representative, legal action is taken on behalf of the representative, the third party. Rights and liabilities arising as a result of this legal transaction arise in the representative’s account. However, if the representative’s authority to represent in terms of internal relations with the represented is invalid, the transaction between the representative and the third party will also be impaired. If the representative gives consent to the legal transaction made by the unauthorised representative, the transaction becomes valid from the beginning.
On the other hand, if the representative does not give consent for the legal transaction made by the unauthorised representative, the transaction will be disabled from the beginning. The third-party may suffer damage due to an invalid legal action in such a case. If the third party is in good faith in the execution of the legal action, that is, he does not know that the representative is unauthorised or is not in a position to know, despite showing all the necessary care, he will be able to claim their damages from the unauthorised representative.
- OGUZMAN, OZ, Borclar Hukuku Genel Hukumler, Vedat Kitapcilik, 2019, Istanbul.
- EREN, Borclar Hukuku Genel Hukumler, Yetkin Yayinlari, 2020, Istanbul
- KOCAYUSUFPASAOGLU, Borçlar Hukukuna Giris, Filiz Kitapevi, 2017, Istanbul.
- ERGUN, Turk Borclar Hukukunda Yetkisiz Temsil Halleri ve Sonuclari, Erciyes Universitesi Hukuk Fakultesi Dergisi, 2016.
- YELMEN, Yetkisiz Temsil, İnonu Universitesi Hukuk Fakultesi Dergisi Ozel Sayı Cilt:1, 2015.
-  Oguzman/Oz, s. 218.
-  Eren, s. 424; Antalya, s. 361.
-  Oguzman/Oz, s. 227 vd.
-  Oguzman / Oz, s. 228 vd
-  Inan/Yucel, s. 356.
-  Oguzman / Oz, s. 230 vd.
-  Oguzman/Oz, s. 248 vd.
-  Feyzioglu, s. 281.
-  Kocayusufpaşaoglu, s. 749; Esener, Yetkisiz, s. 121.
-  Tuncomag, s. 419-420.
-  Kocayusufpasaoglu, s. 720.
-  Akyol, s. 452.
-  Kocayusufpasaoglu, s. 761.
-  ocayusufpasaoglu, s.762; Feyzioglu, s. 290.
-  Kocayusufpasaoglu, s. 669; Eren, s. 446.
-  Oguzman/Oz, s. 257.
-  HGK., T. 14.12.2011, E. 2011/14-707, K. 2011/769.
-  Eren, s. 455.
-  Oguzman/Oz, s.189.
-  Oguzman/Oz, s.189.
-  Eren, s. 458.
-  Eren, s. 457.
-  Kocayusufpasaoglu, s. 732.
-  13. HD, T. 27.2.2003, E. 2002/13428, K. 2003/1988.
-  Kocayusufpasaoglu, s. 732.
Article Keywords: Agency Without Authority, Unauthorised Representation, Authority Abuse.
Translated by: Melissa ISIN.