Power of Attorney Agreement Terminated: Supreme Court Determined the Fate of the Agent's Funds

In the event of a unilateral refusal by the principal from the power of attorney agreement under part 2 of Article 1008 of the Civil Code of Ukraine, the funds received by the agent under this agreement must be returned to the principal if the power of attorney has not been executed. After the termination of the power of attorney agreement, the legal basis for the agent to retain such funds ceases to exist, which is grounds for applying Article 1212 of the Civil Code of Ukraine. This conclusion was made by the Supreme Court in the composition of the panel of judges of the First Judicial Chamber of the Cassation Civil Court.

On June 24, 2026, the Supreme Court considered, in simplified proceedings, the cassation appeal of Person_2 in the case filed by Person_1 against Person_2 regarding the recovery of unjustly retained funds.

To substantiate the claims, the plaintiff argued that in August 2018 he (the principal) entered into a power of attorney agreement with the defendant (the agent), under which the latter was to exercise comprehensive control over the fulfillment of the construction conditions of a real estate object. The plaintiff paid the defendant a fee of USD 745,630.00. However, the defendant did not properly check the quality of the work, the construction was not completed within the established timeframe, and the property was not put into operation. In December 2022, the plaintiff sent the defendant a notice of refusal from the power of attorney agreement and demanded the return of the paid funds.

The court of first instance, whose conclusions were agreed upon by the appellate court, satisfied the claim. The court’s decisions were motivated by the fact that since the defendant did not fulfill the terms of the agreement, and the plaintiff exercised his right to unilaterally refuse the power of attorney, the received amount is subject to return along with the penalty stipulated in the agreement.

The Supreme Court agreed with the conclusions of the lower courts for the following reasons.

According to part two of Article 1008 of the Civil Code of Ukraine, the principal has the right to refuse the power of attorney agreement at any time. This right is unconditional and cannot be limited by the parties' agreement. In the event of termination of the power of attorney agreement before its full execution, the principal is obliged to pay the agent a fee only proportionate to the work performed (Article 1009 of the Civil Code of Ukraine).

The Supreme Court emphasized that the agent is obliged to provide a report on the execution of the power of attorney (Article 1006 of the Civil Code of Ukraine). Since the defendant did not provide any information about actual actions taken under the agreement and did not provide a report to either the plaintiff or the court, there are no grounds for retaining the funds.

Applying Article 1212 of the Civil Code of Ukraine, the Supreme Court noted that a valid agreement is a sufficient legal basis for receiving property, but if such a basis later ceases to exist (in particular due to termination of the agreement), the property is considered retained without sufficient grounds and must be returned.

The Supreme Court stressed that civil cases must be resolved based on the balance of probabilities. Since the defendant did not refute the facts of non-performance of the power of attorney, the courts reached the correct conclusions about the necessity to recover unjustly retained funds.

More details and the text of the Supreme Court ruling dated June 24, 2026, in case No. 953/7681/22 (proceeding No. 61-5952св26) can be found at this link.

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