When does Agency by Ratification arise?
Where a person without being authorized, purports to act as agent, or a duly authorized agent acts beyond his/her authority, the principal may elect to ratify or disown such acts. If he chooses to ratify the agent’s transactions supposedly based on his behalf, an agency by ratification arises. The effect of ratification is that it renders the ratifier (i.e., the principal) bound to the contract, as if, he had expressly authorized the person to transact the business on his behalf.
An agency by ratification is also known as ex post facto agency, i.e., agency arising after the event.
Although the law provides for an agent, exceeding his brief at times, and has given the principal the power to ratify or disclaim such acts, it has also spelt out the circumstances and rules under which such an act can or cannot be considered as agency by ratification.
Rules governing agency by ratification
The following are the rules governing the agency by ratification.
1. An act will be regarded as a ratification only if the principal had a free choice whether to do it or not.
2. The agent must purport (intend to seem) to act as an agent. A principal can only ratify acts, which the agent purported to do on his behalf. This rule follows that if the agent purports to act on his own behalf the principal cannot ratify.
3. The person ratifying must have contractual capacity. This implies that the principal must be competent to contract not only at the time when the agent exceeded his authority, but also when he ratified such act-of the agent.
4. Ratification may be express or it may be implied in the conduct of the person on whose behalf the acts are done. For instance, without A’s authority, his brother B, lent his house to C. Later on C pays the rent for the house and A accepts the same. By this conduct B shall be deemed to have ratified the act of A.
5. The principal must exist when the act is done. Hence, a company cannot ratify per-incorporation agreements.
6. The principal at the time of ratification must have the full knowledge of the material facts.
7. The principal must ratify the whole of the transaction. This implies that he cannot ratify at his sweet will a part of the transaction and repudiate the rest. For example, A, without B’s authority, lends B’s money to C on the term that C will repay the same in four equal yearly installments along with an interest at the rate of 12 per cent to be calculated on yearly reducing balance. Afterwards B accepts the first installment and it amounts to the ratification of the whole transaction.
8. The act must be ratified in time. A contract cannot be ratified after the time fixed for its performance. If no such time is fixed, it must be ratified within a reasonable period of time, from the principal’s acquiring notice of the unauthorized act.
9. Ratification cannot be made when it affects the rights and interest of a third party. For example, A, not being authorized thereto by B, demands, on behalf of B, the delivery of a chattel which is the property of B, from C who is in the possession of it. This demand cannot be ratified by B so as to make C liable for his refusal to deliver.
10. The ratification should relate back to the actual date of the formation of the contract between the agent and the third party. In other words, it should have retrospective effect and not prospective. For example, if A without being authorized thereto lends B’s money to C and afterwards B ratifies the transaction. The contract will be deemed to have been ratified by B on the date on which A lent B’s money to C.
11. Although ratification is not confined to lawful acts, an act, which is simply void in law, cannot be validated by ratification. In other words, only lawful acts can be ratified.
Effects of Ratification
The effect of ratification is to put the principal, agent, and the third party into the position that they would have been if the agent’s acts had been authorized from the beginning. Ratification, in fact, relates back to the time of the unauthorized act, and not to the date when the principal ratified the said act. The doctrine of relating back is based on the assumption that the unauthorized act is not a nullity; if it were, ratification itself would be ineffective either because a nullity cannot be ratified or, the principal himself could not have validly done the act in question, when it took place.