Agency By Ratification

Agency By Ratification
Agency By Ratification
Quick Summary of Agency By Ratification

Agency by ratification occurs when a person (the principal) ratifies a contract or other action that was performed on their behalf by another person (the agent) without prior authorisation. The principal must have full knowledge of the agent’s actions and must accept or adopt the actions as their own. Once ratified, the principal is legally responsible for the agreement or action as if they had originally approved it. However, the principal must ratify the entire action, not just parts of it, and must do so within a reasonable time frame. Ratification can be expressed or implied, and the principal must have the legal capacity to ratify the action.

What is the dictionary definition of Agency By Ratification?
Dictionary Definition of Agency By Ratification

Agency by ratification refers to a legal principle that allows a person or entity (the principal) to retroactively approve or accept the actions or contracts made on their behalf by another person (the agent) who did not have prior authorization. This occurs when the principal, upon learning about the agent’s unauthorised actions, chooses to ratify or confirm those actions, thereby assuming the rights and obligations arising from them. By ratifying the agent’s acts, the principal essentially adopts them as if they had been authorised from the beginning. This principle is often applied in business and legal contexts to validate agreements or transactions that were initially made without proper authority.

Full Definition Of Agency By Ratification

In contract law, the concept of agency plays a pivotal role. An agent acts on behalf of another person, the principal, to create a legal relationship with a third party. One intriguing aspect of agency is the doctrine of “agency by ratification.” This principle allows a principal to adopt an agent’s unauthorised act retroactively. This legal overview will delve into the intricacies of agency by ratification, exploring its basis, requirements, effects, and related legal precedents in British law.

Concept and Basis of Agency by Ratification

Agency by ratification occurs when a person who originally lacks the authority to act on behalf of a principal undertakes an action that the principal later approves or adopts. The retrospective approval by the principal validates the agent’s action as if the agent had the authority from the outset. This doctrine is grounded in the maxim “omnis ratihabitio retrotrahitur et mandato priori aequiparatur,” meaning every ratification is retroactive and is equivalent to a prior mandate.

Requirements for Agency by Ratification

For ratification to be valid, several conditions must be met:

  • Existence of Principal and Agent: At the time of the unauthorised act, there must be a principal who could potentially ratify the act and an agent who performed the act on behalf of the principal.
  • The purported agent must act on behalf of the principal and clearly indicate that they are acting for the principal and not on their own behalf or for another third party.
  • Principal’s Full Knowledge: When ratifying the act, the principal must know all material facts concerning the transaction. Ratifications made out of ignorance or misapprehension of the facts are invalid.
  • Principal’s Capacity: The principal must have the legal capacity to authorise the act both at the time of the act and at the time of ratification. This means the principal must be competent and legally able to enter into the type of transaction being ratified.
  • Timing of Ratification: Ratification must occur within a reasonable time frame after the unauthorised act. What constitutes a reasonable time can vary depending on the circumstances of each case.
  • Act Must Be Capable of Ratification: The act in question must be legally ratified, lawful, and within the scope of the principal’s authority.

Effects of Ratification

Once an unauthorised act is ratified, it is treated as if it had been authorised from the beginning. The primary effects include:

  • Validation of the Agent’s Act: The agent’s unauthorised act is validated, and the agent is relieved of liability for acting without authority. The principal assumes responsibility for the agent’s actions.
  • Binding Relationship with Third Parties: The principal is bound by the contract or transaction as if they had authorised it initially. Third parties relying on the agent’s apparent authority are also bound.
  • Retroactive Effect: The legal relationship is deemed to have existed from the moment the agent performed the unauthorised act, not from the time of ratification.
  • Agent’s Right to Indemnity: The agent may have a claim against the principal for any costs or liabilities incurred while acting on the principal’s behalf.

Legal Precedents in British Law

Several landmark cases in British law illustrate the application of agency by ratification:

  • Keighley, Maxsted & Co. v. Durant (1901): In this case, an agent purchased wheat on behalf of Keighley, Maxsted & Co. without their authority. Keighley, Maxsted & Co. later ratified the purchase. The House of Lords held that since the agent had purported to act on behalf of the principal and the principal had ratified the act with full knowledge, the ratification was valid.
  • Bolton Partners v Lambert (1889): An agent accepted an offer to purchase property on behalf of Bolton Partners without authority. Bolton Partners later ratified the acceptance. The Court of Appeal held that the ratification was effective and binding on the third party, even though the third party had attempted to withdraw the offer before ratification.
  • Grover & Grover Ltd v Matthews (1910): An agent of Grover & Grover Ltd entered into a contract without authority. The company ratified the contract after learning all the details. The court confirmed that ratification was valid and binding, emphasising the need for the principal to have full knowledge of the material facts.
  • Re Portuguese Consolidated Copper Mines Ltd (1890): In this case, an agent entered into a contract without authority, which the principal ratified later. The court held that once ratified, the contract was binding from the date it was originally made, highlighting the retroactive nature of ratification.

Limitations and Exceptions

While agency by ratification is a powerful doctrine, there are limitations and exceptions:

  • Illegal Acts: An illegal act cannot be ratified, and the principal cannot adopt an unlawful act against public policy.
  • Third-Party Withdrawal: If a third party withdraws from the transaction before ratification, the principal cannot enforce the contract against the third party. Ratification cannot revive a contract that no longer exists.
  • Agent’s Capacity: The act cannot be ratified if the purported agent cannot form a contract (e.g., due to being a minor or lacking mental capacity).
  • Principal’s Prior Involvement: If the principal had previously disapproved or revoked the agent’s authority before the unauthorised act, ratification may not be possible.
  • Condition Precedent: If a condition precedent must be fulfilled before the principal can act, ratification cannot occur until the condition is met.

Comparative Perspectives

While this overview focuses on British law, it is useful to briefly compare agency by ratification with similar principles in other jurisdictions:

  • United States: The doctrine is similar, and the American Restatement (Third) of Agency lists similar requirements for ratification, such as the need for the principal to know about the action and for the agent to clearly show that they are acting on behalf of the principal.
  • European Union: Member states generally follow similar principles, though nuances exist based on civil law traditions. For instance, the doctrine is recognised in France and Germany, but the specific requirements and effects can vary.
  • Commonwealth Countries: Many Commonwealth countries, including Australia and Canada, follow the British model closely, incorporating similar legal precedents and ratification requirements.

Practical Considerations

For legal practitioners, understanding the doctrine of agency by ratification is crucial for advising clients in various scenarios, such as:

  • Commercial Transactions: Businesses often operate through agents, making it vital to know when and how unauthorised acts can be ratified to bind the principal legally.
  • Real Estate Deals: Agents frequently act on behalf of buyers and sellers. Knowing the boundaries of authority and the potential for ratification can prevent disputes and ensure smooth transactions.
  • Employment Relationships: Employees may act on behalf of employers, sometimes without explicit authority. Employers must understand when they can ratify these actions to avoid unintended liabilities.
  • Litigation: In disputes involving unauthorised acts by agents, lawyers must be adept at arguing the validity or invalidity of ratification based on specific facts and legal principles.

Conclusion

Agency by ratification is a nuanced doctrine that allows principals to adopt unauthorised acts performed on their behalf, retroactively validating the agent’s actions. It requires careful consideration of various factors, including the agent’s intent, the principal’s knowledge, and the timing of ratification. Legal precedents in British law provide a robust framework for understanding and applying this doctrine, while comparative perspectives highlight its universal relevance with jurisdictional variations. For practitioners, a thorough grasp of agency by ratification is essential for advising clients effectively in various legal and commercial contexts.

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This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 11th June 2024.

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