Ratification

Definition: Ratification is one of the modes of creation of a contract of agency.

In ratification, a person who is not authorized professes to act as an agent of another person or an agent who is duly appointed, performs an action on behalf of the principal which is beyond his/her periphery and the principal does not have any knowledge of the same, then in such a case, the principal has the option to ratify (confirm) or refuse to acknowledge such acts.

Now if the principal approves, i.e. takes responsibility and accepts liability of the act performed in his/her name, it is called as ratification and the same rules will apply as if the act is performed with authority. That is why it is also called as ex post facto agency.

Example

John buys goods for Alex without any authority. Later on, Alex sells those goods to Michael. In such a case, Alex’s conduct signifies that ratification of the purchase of the goods is made.

Pre-requisites of Valid Ratification

There are certain essential conditions which need to be satisfied for valid ratification, discussed hereunder:

• Express or Implied: Ratification must be given expressly or impliedly in the conduct of the ratifier, i.e. the principal, on whose behalf the agent has performed the act.
• Reasonable time: The ratification of the act performed by another person on behalf has to be made within a reasonable period of time.
• Communication: Ratification of the act is required to be communicated to the other party.
• Lawful Act: The act which is being ratified must be lawful in the sense that it must not be void or illegal.
• Contractual Capacity: The principal, on whose behalf the act is performed, must be competent to contract both at the time when the act has taken place and at the time of ratification. Further, the principal must be in existence at the time when the act is performed in his name.
• Knowledge of the facts: The ratifier, i.e. the principal should have complete knowledge about the material facts of the case for valid ratification, otherwise, even if he accepts the act, the ratification will not be binding on him/her, on the grounds that knowledge of the fact is materially defective.
• Applies to the whole transaction: When a person ratifies an act which is done by another person on the former’s behalf without any authority, then the ratification of the whole transaction is done, of which such act is a part. This is due to the fact that ratification or rejection applies to the whole act and not to a specific part.
• No injury to the third party: The ratification principle does not apply if the third party’s interest is being affected by such ratification. If an act performed by any person on another person’s behalf, without prior authority, which can cause damages to a third person or their interest will be affected, if the act was performed with authority, then ratification does not apply.

Ratification has a retrospective effect, which means that it is concerned with the original contract creation, i.e. it is assumed that the agency came into being at the moment when the agent acted for the very first time, instead of the date on which the principal ratified it.

Moreover, ratification creates an agency relationship between the principal and agent concerning the ratified act only and not in connection to any other act performed in the past or the act that will be performed in the future