Ratification

Question 1

Effect of Ratification

Answer 1

An agency relationship is created by ratification when an “agent” purports to act on behalf of a “principal” without any authority at all, but the “principal” subsequently validates the act and becomes bound. In other words, even if the “agent” had no authority at the time of entering into the contract, the “principal” will still be bound by the “agent’s” actions if the “principal” ratifies the contract.

Question 2

Methods of Ratifying

Answer 2

Ratification may be express or implied through the conduct of the “principal.” The most common form of express ratification is oral or written affirmation of a contract (for example, a company resolution). The most common form of implied ratification is when
the “principal” accepts the benefits of the contract. Other ratifying conduct would include silence

Question 3

Requirements for Ratification

Answer 3

For ratification to occur, the “principal” must:
a. Have knowledge of (or have reason to know) all material facts regarding the contract
b. Accept the entire transaction (meaning the “principal” cannot merely ratify a portion of the transaction) AND
c. Have capacity (be competent and of legal age)
Ratification is a unilateral act of the “principal” and requires no consideration.

Question 4

What May Be Ratified and by Whom

Answer 4

A “principal” may ratify anything unless: (1) performance was illegal at the time of ratification, (2) the third party has withdrawn, or (3) there has been a material change in circumstances. Under the Second Restatement, which is followed by most states, an undisclosed “principal