Ratification COPY

Question 1

Saunderson v. Griffiths (1826)

Answer 1

Another authority that ratification will not effective if not done FOR the principal.

Here, held; that A’s purported ratification of a contract made by the agent in the name and on behalf of A’s WIFE and X was of no effect, and A could not sue upon it.
Confirms the overarching idea here that the act must be done for the principal and that ONLY the person in whose name and on whose behalf the ‘agent’ has purported to act may ratify the transaction.

Question 2

National Oilwell (U.K.) Ltd. v. Davy Offshore Ltd. [1993]

Answer 2

First instance decision - suggested that there is no reason why the special rule on insurance contracts (that they can be ratified after loss has already been suffered) shouldn’t extend to non-marine insurance.

Here, concerned a policy to insure an oil rig in the North Sea.
Held; it was a marine policy and therefore could be ratified after a loss had occurred.
But judge did say that he couldn’t see why this notion shouldn’t be extended to non-marine policies.
But no subsequent reported case on which this issue has been considered.

Question 3

Newborne v Sensolid (Great Britain) Ltd. [1953]

Answer 3

Company - pre-incorproation contract - he signed on behalf of the company name Ltd - but not yet incorporated.
Held; he could not sue on this contract since he did not make it as an agent or as a principal – as the principal purported to be the company.
Conversely, he could not be sued on it either - whole transaction was ineffective.

One authority for the requirement that for ratification to be effective, the principal must be IN EXISTENCE at the time of the transaction.
Principal cannot ratify transaction if not in existence at the time of the transaction.

Distinguishable from Kelner v Baxter.

Question 4

Kelner v Baxter (1866)

Answer 4

An agent entered into a written contract on behalf of a company not yet incorporated.
Signed it as HIMSELF acting as an ‘agent’ on ‘behalf’ of the company - rather than as the company itself.
Held; he was personally liable on the contract.
(Old case) parol evidence was not admissible to prove he did intend to be bound personally.

Distinguishable from Newborne v Sensolid - mainly down to old parol evidence rules.

Question 5

Watson v. Swann (1862)

Answer 5

Another requirement for ratification to be effective: The principal has to be ascertained or, at least ascertainable, at the time of the transaction.
I.E. have to be able to find out who the principal is at the time of the transaction.

Here, insurance contract, where an agent declared some goods belonging to his principal under an insurance policy which he had, without revealing to the insurance company that these goods belonged to his principal and not to him.
Held; the principal had not ratified the transaction.
WILLES J:
“the person for whom the agent professes to act must be a person capable of being ascertained at the time. It is not necessary that he should be named; but there must be such a description of him as shall amount to a reasonable designation of the person intended to be bound by the contract”.
Idea that ratification is dependent on the third party knowing or having the means of knowing with whom the agent was drawing him into contractual relations (thus an undisclosed principal cannot RATIFY -
Keighley, Maxsted & Co. v Durant)

Question 6

Requirements for Ratification to be Effective

Answer 6

(i) The Principal must be in existence at the time of the transaction.
(ii) The Principal must have capacity to enter into the transaction.
(iii) The Principal must be ascertained or ascertainable at the time of the transaction.
(iv) The act must be done for the Principal.
(v) The Principal must ratify the act within a reasonable time.

Question 7

Forman & Co. Pty. Ltd. v. The Liddesdale [1900]

Answer 7

Agent acting on behalf of shipowners had authorised some repairs to the ship, although not authorised to do so.
Owners took delivery of the ship when the repairs were completed.
Q: did their taking delivery of the ship constitute a ratification of the agent’s act in entering into a contract for the repairs.
JCPC held; no – because the owners had no choice but to take the ship back, and therefore there act of doing so wasn’t to be treated as ratification of the agent’s act.
NOT SUFFICIENT PROOF OF RATIFICATION - EVEN AN IMPLIED ONE.

Peculiar case because as repairers, the repairers would’ve had a lien over a ship.

Question 8

Keighley, Maxsted & Co. v Durant [1901]

Answer 8

Act must be done FOR the principal - look for facts which imply benefit to the principal.
Thus, an UNDISCLOSED PRINCIPAL cannot ratify a transaction.

Here, agent was seeking to take advantage of transaction for himself.
Entered into a contract with a third party, but without disclosing who he was claiming to be acting for. His (undisclosed) principal then ratified transaction, intending to benefit from it - price of commidity plunged - principal denied he was liable on contract.
H OF L Held; YES.
Principal not liable as he was undisclosed at the time of the transaction.
Authority for the propositions that:
(i) an undisclosed principal cannot ratify a transaction; and
(ii) only the person in whose name and on whose behalf the ‘agent’ has purported to act may ratify the transaction.

Otherwise, would be too easy for people to intervene in transactions which were not intended to be there for benefit - opportunistic principals.
Case is reviewable by UKSC, but opportunity has never arose.

Question 9

Re Tiedermann and Ledermann Frères

Answer 9

Agent claimed to be acting on behalf of named principals, when in fact he was unauthorised to do so, intending to take the benefit of the transaction for himself.
Thus acting for unidentified principal rather than an undisclosed principal.
The principals found out and ratified the transaction.
Held; principals were entitled to sue under it, even though the agent wasn’t really intending them to benefit - because they were DISCLOSED (but unidentified principals) - thus could ratify transaction.

Thus, if agent falsely declares that he is acting on behalf of a principal, the person named as principal is entitled to ratify the contract.
Mirror image of Keighley, Maxsted & Co v Durant.

Question 10

OPM Property Services Ltd v Venner [2004]

Answer 10

Another case on PROOF OF RATIFICATION.

A vendor refused to execute a sale of his house on the ground that his agent had acted without authority and that the contract was therefore unenforceable.
However, held; that the defendant had, on the evidence, clearly and unequivocally ratified the exchange of contracts.
For example, after the property had remained unsold for a long period, on hearing the news that his estate agent had sold it at last, the vendor went round to the agent’s office with a bottle of champagne.

Question 11

Watson v. Davies [1931]

Answer 11

A contract was made EXPLICITLY subject to ratification within a particular time limit.
Held; ratification after the time limit was ineffective, as the time limit had been agreed explicitly.

Question 12

Bedford Insurance Co. Ltd. v. Instituto Resseguros do Brasil [1985]

Answer 12

Q: could a principal effectively ratify an unauthorised contract after the time that the period of cover provided for by the insurance policy had already started?

JUSTICE PARKER - held; Ratification WAS possible in this scenario.
(Although, the particular ratification on this case was ineffective for other reasons to do with interpretation of the insurance legislation (therefore this is obiter dicta))

But seems to qualify Metropolitan Asylum case - this is now the preferred view:
Whilst the TIME FOR PERFORMANCE of the contract is certaintly an important factor to take into account when considering whether a ratification has been within a reasonable time, is it not decisive.
A matter of evidence as to ‘reasonable time’

Question 13

Boston Deep Sea Fishing and Ice Co. v. Farnham [1957]

Answer 13

Illustration that principal must have CAPACITY to enter into the contract, both at the time of the transaction itself AND at the date of ratification.
I.E. principal must himself have been LEGALLY CAPABLE of doing the act.
Often about mentally incapacitated people or minors - this case not about that though.

Here, tax case - British people acted as agents for French owners of fishing vessels - during WW2 continued relationship but couldn’t communicate with French owners.
Q: did they have to pay tax on the profits?
Relevant tax statute said yes IF they were carrying on a “regular agency”.

But, HELD; not carrying a “regular agency”.
French owners, although they had impliedly ratified the activities of the English agents, were “enemy aliens” during the war for the purposes of private law matters - thus they lacked capacity to ratify the English agents’ activities.

Question 14

Companies Act 2006, s.51 (1)

Answer 14

(1) A contract that purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary, as one made with the PERSON purporting to act for the company or as agent for it, and he is PERSONALLY liable on the contract accordingly.

Deals with the Kelner v Baxter; Newborne v Sensolid scenario.

Question 15

Bolton Partners v. Lambert (1889)

Answer 15

RATIFICATION OPERATES RETROSPECTIVELY FROM THE DATE OF THE TRANSACTION.
If the principal ratifies the transaction, the transaction is effective from the date the transaction is entered into, and not the date of ratification.

Here, a prospective tenant made an offer to take a lease over premises to agent of the landlord - agent was not authorised to actually enter into the lease.
Tenant subsequently revoked his offer – allegedly thought he’d been induced to enter into the contract by this misrep.
The principal then ratified the transaction.
Was the tenant bound to the lease?

Held; YES – tenant was bound, because the ratification operated retrospectively to the date of the grant of the lease, rather than the date of the ratification itself.
Therefore, the attempted revocation by the tenant was ineffective.

Question 16

Presentaciones Musicales SA v. Secunda [1994]

Answer 16

(In English Civil Procedure law, time limits are a procedural barrier to bringing claim - do not destory claims like in civil law systems - limiting, but not prescriptive).

Here, an English law firm issued a writ against the defendants for breach of copyrighy, on behalf of a Panamanian company.
English firm not authorised to do this.
Company had been acquired and dissolved . But under local law, Board of a dissolved company authorised for a period after the takeover to conduct litigation on behalf of the now dissolved company.
The action, as issued by the solicitors, was within the limitation period in English law for bringing a claim of this kind - Board ratifed the act of firm in issuing the writ.
By the time of ratification however, English law limitation period had expired.
Thus writ would be effective applying rule in Bolton Partners v Lambert, in which case ratification would be effective from the date the writ was issued.

C of A held; Ratification WAS effective here, so allowed copyright action to proceed.
Difficult to reconcile with the idea that can’t use ratification to extend a time limit - as in Dibbins v Dibbins.
ROCH LJ– put it down to the nature of limitation in English system – because expiry of the limitation period just puts a procedural barrier in the way, and doesn;t destroy the right of action, the effect of ratification here was just to remove the barrier – it doesn’t create a new cause of action or extend the time limit.

Question 17

Donelly v. Popham (1807)

Answer 17

Example of Bowstead & Reynold’s second exception Bolton Partners v Lambert.
“…where it affect proprietary rights in either real or personal property, including intellectual property rights, which have arisen in favour of the third party or others claiming through him since the act of the unauthorised agent”.

Old days - if Royal Navy captured enemy ship, crew entitled to prize money - fixed on statutory scale, depending on their rank.
Here, a Commodore was appointed as captain of ship - appointment required ratification by Board of Admiralty - ratified eventually.
Q: who was entitled to prize money between date of his appointment and date of ratification?
Held; it belonged to the people who WOULD HAVE have been entitled to the money before the ratification - because they already had a vested right to the money, and the rule that ratification operates retrospectively couldn’t alter that.
Proprietary right had already arisen in their favour.

Question 18

The Borgvigilant [2003]

Answer 18

Q: was it possible to ratify a contract which contained an exemption clause which barred an action in tort that which the third party was already trying to bring?

Ship owner entering a port was required to sign contract for tug service which excluded the port operator’s liaiblity AND that of the tug owner.
Damage - ship owner sued tug owner.
Held; port operator had implied authority to sign contract on behalf of tug owner.
BUT - obiter:
Had there been no implied authority, a letter sent by tug owner AFTER the incident constituted ratification, even though the ship owner’s action in tort would have already accrued; tug owner would’ve been able to rely on exemption clause.
Despite only ratifying the agent’s contract after the incident had occurred.

Obtier, said Presentaciones Musicales v Secunda was approved.

Question 19

Metropolitan Asylums Board Managers v Kingham & Son (1890)

Answer 19

If no time limit fixed for ratification, as there often will be (e.g Watson v Davies), to be effective, ratification must take place within a “reasonable time” after the transaction.
- question of fact in each case.

Here, concerned a contract for the supply of eggs to a lunatic asylum.
Board had accepted defendant’s tender - but had to contract under company’s seal under its articles.
Before Board had attached seal, defendant withdrew offer.
Held; Board could NOT then enforce the contract, as can’t ratify a contract after the time for performance has passed.
In this particular case, the time passed before the seal was attached to the contract.
Case purports to lay down the principle that you can’t ratify once the time for PERFORMANCE has passed.
I.E. Ratification will be ineffective if it takes place after PERFORMANCE of the contract was due to begin.

Question 20

Bird v. Brown (1850)

Answer 20

Cite alongside Donelly v Popham - rule that ratification operates retrospectively won’t be used to alter already-vested proprerty rights

In sales of goods law, seller has remedy of Stoppage in Transitu - if buyer yet to pay goes insolvent, can get goods back from carrier before delivery.
Here, agent acting on behalf of seller served notice of stoppage because buyer had become insolvent - but agent was not authorised to serve this notice.
Second and third notice also unauthorised.
Finally, the principal (the seller) ratified the third notice of stoppage.
Q: was this third notice effective?
By this time, goods had reached insolvent buyer - so trade creditors of buyer wanted to claim against them, so arguing that they hadn’t revested in seller.

Held; ratification was ineffective, because the ownership of the goods had already vested with the buyer (the buyer’s trustee in bankruptcy).
The rule that ratification operates retrospecitlvey could not be used to divest the buyer’s trustee in bankruptcy from their right in the property.

Question 21

Mental Capacity Act 2005, s.2

Answer 21

Defines people who ‘lack capacity’ (without which, ratification cannot be effective).

(1) …a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain.
(2) It does not matter whether the impairment or disturbance is permanent or temporary.

(3 )A lack of capacity cannot be established merely by reference to—

(a) a person’s age or appearance, or
(b) a condition of his, or an aspect of his behaviour, which might lead others to make unjustified assumptions about his capacity.

(4)In proceedings under this Act or any other enactment, any question whether a person lacks capacity within the meaning of this Act must be decided on the BALANCE OF PROBABILITIES.

Question 22

Bowstead & Reynolds: What constitutes PROOF OF RATIFICATION?

Answer 22

BAR SET VERY LOW!

(1) May be express or by conduct.
(2) will be express if: a clear manifestation by one … that he treats the act as authorised and becomes a party to the transaction in question. It NEED NOT be communicated to the third party OR the agent (so once principal has manifested intention to ratify, ratification is proven even though agent/3rd party don’t know of it)
(3) will be implied wherever the CONDUCT of the person… as to amount to clear evidence that he adopts or recognises such an act or transaction; and may be implied from the mere acquiescence or inactivity of the principal.
(4) The adoption of part of a transaction operates as a ratification of the whole.
(5) It is not necessary that the ratification of a written contract should be in writing, but the execution of a deed can only be ratified in writing.

Question 23

Bowstead & Reynolds: Exceptions to the rule in Bolton Partners v Lambert

Answer 23

Underpinned by overarching principle that ratification will NOT be effective when it UNFAIRLY PREJUDICES a third party.

(1) Where it is essential to the VALIDITY of an act that it should be done within a certain time, the act cannot be ratified after that time, to the prejudice of any third party.
(2) Where it will affect proprietary rights in either real or personal property, including intellectual property rights, which have arisen in favour of the third party or others claiming through him since the act of the unauthorised agent.
(3) The ratification of a contract can only be relied on by the principal if effected within a time after the act ratified was done which is reasonable in all the circumstances - see Metropolitan Asylum and Bedford Insurance cases on this point).

Question 24

Trident General Insurance Co. v. McNiece Bros. Pty. Ltd. (1987)

Answer 24

Australian case illustrating special rule for insurance contracts.

In marine insurance contracts it’s well settled that ratification can take place AFTER there has been a loss.
If, for example, an agent acting on behalf of a ship owner enters into an unauthorised insurance contract over the ship, and the ship is lost or damaged, the shipowner can nonetheless ratify the contract amd benefit.

Question 25

Braymist Ltd. v Wise Finance Company Ltd. [2002]

Answer 25

S.51(1) CA2006, although it says that the agent is “personally liable” on a pre incorproation contract, it doesn’t say whether agent can sue under the contract.

C of A held; yes.
Majority: constructing the statute, it simply follows that if agent can be personally liable, he must also be able to sue.
Lady Justice ARDEN - dissented - not possible on interpreration of s.51 (1) - so must use common law principles - said agent CAN still sue, by applying Kelner v Baxter.

This question is perhaps still open for the UKSC to reconsider if opportunity arose.

Question 26

Suncorp Insurance and Finance v. Milano Assicurazione SpA [1993]

Answer 26

GENERAL RULE is that the principal cannot both ratify the contract and sue the agent for having exceeded his authority.
I.E. Can’t have his cake and eat it.

However this case, though first instance, suggested that there may be some exceptions to this general rule - e.g. where the principal is effectively given no choice but to ratify, in order to preserve his own commercial standing.
.
I.E. principal doesn’t want to ratify the transaction, and although legally he doesn’t have to, feels obliged to do because if he walks away from it third parties won’t do business with him in the future - no reported cases on this though.

Question 27

Phonogram Ltd v Lane [1982]

Answer 27

Illustration of s.51 (1) CA2006 in action.

Contract made between a record company and a company being formed to manage a pop singing group, under which the record company paid some money to the band.
Contract was made by the band’s manager.
Company was never actually formed.
Record company sued the band manager for the money.
Held; under s.51 (1) CA2006 (equivalent), band manager was personally liable on the contract.

Question 28

Dibbins v. Dibbins [1896]

Answer 28

Under a partnership agreement, on the death of either partner, the survivor had the right to purchase the share of the deceased partner, provided notice to the deceased partner’s executors within 3 months of his death’ – a type of pre-emption right.
One partner died - agent acting on behalf of surviving partner gave notice within 3 months - but this notice was ineffective as at the time, surviving partner was insane - so lacked capactiy to appoint agent etc.
Later, authority to exercise the pre-emption right was granted by the Court of Lunacy - but now the 3 month time limit had expired.

Held, the second notice, whilst (in theory) effective, was too late, and therefore did not ratify the agent’s actions.
Authority for the proposition that you can’t use ratification as a way to extend your time limit for doing something.
Can’t have an ineffective exercise of some power within a time limit, and then ratify it properly later after the time limit.

Example of Bowstead & Reynold’s first exception Bolton Partners v Lambert.
“Where it is essential to the validity of an act that it should be done within a certain time, the act cannot be ratified after the expiration of that time, to the prejudice of any third party”.

Question 29

Smith v. Henniker-Major [2002]

Answer 29

Along with The Borgvigilant, this case also supports Presentaciones Musicales v Secunda.

“Held; That, although ratification of proceedings by a party in whose name they had been issued was not automatically barred after expiry of the limitation period, a party wishing to ratify a transaction had to adopt it in its entirety and not merely pick out those parts which were to his advantage”.

Question 30

Yona International Ltd v La Reunion Française SA d’Assurances [1996]

Answer 30

MOORE-BICK J (obiter):
“The essence of ratification is a decision by the principal to adopt the unauthorised act as his own…It does not therefore depend on communication with or representation to the third party…Ratification can no doubt be inferred without difficulty from silence or inactivity in cases where the principal, by failing to disown the transaction, allows a state of affairs to come about which is inconsistent with treating the transaction as unauthorised.
…Where there is nothing of this kind, however, the position is more difficult since silence or inaction may simply reflect an unwillingness or inability on the part of the principal to commit himself. For that reason it will not usually be sufficient to evidence ratification…”

Thus, whether silence contitutes ratification by conduct will depend on the facts - MOORE-BICK J suggests something slightly more is needed - “a failure to disown the transaction”.

Question 31

Koenigsblatt v Sweet [1923]

Answer 31

LORD STERDALE MR:
“Ratification…is equivalent to an ANTECEDENT AUTHORITY…and when there has been ratification the act that is done is put in the same position as if it had been antecedently authorised.

Thus ratification allows principal to adopt the transaction of an unauthorised agent, allowing principal to take the benefits of that transaction, clothing the agent with authority retrospectively.

Covers two types of case.

(1) Where someone has purported to act as an agent for another, without having actually been appointed as an agent – nevertheless, the principal can ratify their actions.
(2) Where someone has been appointed as an agent, but they make a transaction in excess of their authority – this is the more common scenario, nevertheless, principal can still ratify the transaction.