The Supreme Court of Cassation has issued on 12 December 2016 Interpretative Decision 5/2014 under interpretative case 5 of 2014 whereby the Supreme Court of Cassation gave interpretation as per Bulgarian law on a number of important issues related to authorization by way of power of attorney:

  • First, the Interpretative Decision deals with the content of PoAs authorizing transfer of property. There have been different views on the level of complexity and detail that such PoAs should feature in order to be valid. According to one line of case law, a PoA for transfer of property should be very detailed laying down the parameters of the envisaged transaction, including price and buyer. But the Supreme Court of Cassation adopted the other opinion, according to which the legislation contains very few mandatory requirements on the contents of PoAs and therefore it should be considered that it is sufficient that the PoA contains expression of the will of the principal. According to the Supreme Court of Cassation it is not absolutely necessary that the PoA contains detailed parameters of the transaction as long as it can be inferred on basis of the PoA what is the intent of the principal.
  • Second, the Interpretative Decision deals with the issue of the legal effect of a transaction concluded on basis of an invalid PoA or in excess of the authority of the agent. The Supreme Court of Cassation does not consider that such a transaction is absolutely null and void. The principal may confirm the transaction even though the PoA is invalid or the authority has been exceeded. Upon confirmation, the transaction will produce its legal effect but until and unless the principal does so, the transaction is void. However, only the principal is entitled to claim that the transaction is void.
  • Third, the Supreme Court of Cassation interpreted the legal effect of a transaction concluded by the agent (proxy) not in the best interest of the principle. Under Article 40 of the Bulgarian Obligations and Contracts Act, if the agent and the counterparty with whom the agent negotiates enter into a contract to the detriment of the principal, the contract shall not have effect as to the principal. It has been a matter of debate whether such a contract would be absolutely null and void or not. In the Interpretative Decision the Supreme Court of Cassation reasoned that the contract should be invalid and should not bind the principal. Only the principal would be entitled to claim that the contract be declared invalid. The contract will not be considered as invalid with regard to the third parties – they should consider the contract as valid until it is declared void. If any transfer of property, including payment of money, has been rendered on basis of such contract, this property, including money, can be recovered by the principal.

The Interpretative Decision 4/2015 of the Supreme Court of Cassation is expected to bring important clarity on real estate and other types of transactions.