What does a Power of Attorney document establish?

A Power of Attorney document establishes a legal authority that allows one person (the principal) to appoint another person (the agent or attorney-in-fact) to act on their behalf in specific or all legal and financial matters. This document is a written contract that formalizes the agency relationship between the principal and the agent, delineating the powers granted and the limitations of those powers.

By creating a written record of this relationship, the Power of Attorney ensures that the principal’s wishes are clearly understood and can be acted upon without ambiguity. This clarity helps to protect both the principal's interests and the agent’s responsibility in managing the principal's affairs.

The other options do not accurately capture the function of a Power of Attorney. While a formal agreement between two parties may be involved, it does not fully represent the specific legal delegation of authority intended in a Power of Attorney. A verbal understanding is insufficient for establishing legal authority; hence it does not constitute a Power of Attorney. Guidelines for contract enforcement do not pertain directly to the role of a Power of Attorney, as this document specifically establishes agency rather than focusing on contract enforcement.