Mandates in German Civil Law
A Mandate (Auftrag) is an agreement by which an individual is obliged to gratuitously carry out a transaction for the issuer of the mandate. See § 662 BGB.
The mandatee (Auftragnehmer) is required to follow the instructions provided by the mandator (Auftraggeber). However, he/she is entitled to deviate from the instructions of the mandate provided that it can be reasonably determined by the factual circumstances that the issuer would approve of such deviations thereby providing a degree of flexibility in an otherwise rigid structure. The mandatee must notify the issuer prior to deviating from the mandate and must await approval unless the delay shall result in injury. See § 665 BGB.
The mandatee must keep the mandator reasonably informed and provide information regarding the status of the transaction upon request. After carrying out the mandate the mandatee must provide an accounting. See § 666 BGB. Further, he is obliged to return to the issuer everything received in while performing the mandate and anything obtained from carrying out the mandate. § 667 BGB.
The mandatee may claim reimbursement of expenses incurred in performing the mandate. See § 670 BGB.
A mandate can be revoked by either party at any time. See § 671 BGB.
Post-mortem and trans-mortem Mandate
A mandate remains effective even in case of incapacity or death of the principle unless it has been agreed that it terminates upon the death of the principle. Should there be any question regarding termination, the default rule is that the mandate does not become ineffective by the death or incapacity. See § 672 BGB. A mandate may even be triggered by the death of an individual. A post-mortem mandate (Auftrag auf den Tod) does not have to comply with the form of a testamentary disposition even if the agent has a power to make gifts (Schenkungen) as the mandate is a revocable legal instrument (see above). As a result, the rules for a gift mortis causa (Schenkung auf den Todesfall) do not apply.
Mandate and post/trans-mortem Power of Attorney
The mandatee must obtain a power of attorney (Vollmacht) to make agreements that bind the mandator. The power of attorney is generally issued on a separate document and is often signed in front of a German notary (Notar).
With regard to a mandate, a power of attorney remains effective subsequent to the death of the principle if the power of attorney or the underlying mandate agreement indicates that it shall remain effective. Should there be any doubt, the default rule is the power of attorney does not end with the death of the principle. After the death of the principle, the declarations of the attorney-in-fact for the decedent bind his/her heir (Erbe) unless the heir has revoked the power of attorney.
Post-mortem and trans-mortem Mandate and execution of the estate
The duties of the mandatee can be similar to those of an executor (Testamentsvollstrecker). However since the mandate may be terminated by an heir or executor at any time without any reason, the mandatee `s position is more tenuous. The main advantage with a mandate is that the mandatory can start to administer the estate before
- the heirs are identified and a certificate of inheritance (Erbschein) has been issued and/or
- the executor (Testamentsvollstrecker is identified and a German certificate of executorship (Testamentsvollstreckerzeugnis) has been issued.
This is particularly beneficial in international probate matters as the probate judge may have to apply foreign law or interpret a foreign will which may delay the issuance of a certificate of inheritance or certificate of executorship.
Arguably, the mandatee/attorney-in-fact may even consent to the registration of the heir, legatee (Vermächtnisnehmer) or other person as new owner of real property in a German land registry (Grundbuch) and interests in corporations/partnerships in a commercial register (Handelsregister).
Use of Post-mortem and trans-mortem Mandate in international estate planning
In international estate planning matters a mandate/power of attorney is generally used in combination with other estate planning instruments, e.g. a (situs) will (Testament), a durable power of attorney (Vorsorgevollmacht) or a bank power of attorney (Bankvollmacht). In many cases the mandatee also acts as the executor or is the (sole) heir. While the power of attorney is generally made in writing or notarized, there is often no written post-mortem or trans-mortem mandate and in many situations, e.g. if the mandate is limited to organize the burial, there is no reason for a written contract. However, if the mandate is complex, e.g. if the mandatory shall (like an executor) settle the estate, the mandate should be in writing and outline his tasks, obligations, and powers.
Glossary: Post-mortem Power of Attorney (Postmortale Vollmacht); Trans-mortem Power of Attorney (transmortale Vollmacht)
