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Ratification in agency

Previous: Agents’ authority

Ratification is the process by which a principal retrospectively authorises a specific act of his agent, which was unauthorised at the time of the act. Koenigsblatt v Sweet (1923) summarised the doctrine as being ‘equivalent to antecedent authority’ for an agent. Although, not all acts can be authorised. A principal will usually wish to ratify an act for financial gain.

Prerequisites

Ratifiable act

The first prerequisite to ratification is the requirement that the agent must have performed the unauthorised act on behalf of his principal. As such, according to Brook v Brook (1871), forgeries cannot be ratified. In principle, illegal acts are also not ratifiable, but Bedford Insurance Co v Instituto de Resseguros do Brazil [1985] notes that there are different types of illegality; if permitting ratification is not repugnant to public policy, it will be allowed.

Ascertainable principal

For a principal to ratify an act, the third party need not have know who the principal was at the time, but the principal must have been ratifiable. Only a principal may ratify, according to Jones v Hope (1880). If this were not the case, third parties would never know if they were bound by the contracts they had agreed to or not. An undisclosed principal cannot ratify as he cannot be identified, according to Keighley, Maxted & Co v Durant (1901).

Competent principal

If the principal would not have had the capacity to enter into the agent’s agreement at the time of the agreement, ratification will not be permitted. This was illustrated by Boston Deepsea Fishing Co v Farnham [1957], where the principal was an alien at the time. However, there are two exceptions to this rule. If public policy is not infringed upon, children may ratify once they reach the age of majority, and there is no reason why a company cannot ratify acts carried out by its ‘agents’ pending its incorporation.

Knowledgeable principal

According to Suncorp Insurance & Finance v Milano Assicurazioni [1993], a principal may only ratify if he is aware of the material facts and circumstances surrounding the unauthorised act; he need not know about the law on ratification.

Method of ratification

Sea Emerald v Prominvestbank [2008] confirmed that acts may be ratified by a unilateral manifestation of the will of the principal, buy xanax 0.25 meaning that ratification can be implied. Ratification was implied in Suncorp Insurance & Finance v Milano Assicurazioni [1993], where the principal ratified by failing to exercise rights to the contrary. This case also confirmed that a whole agreement must be ratified; an agreement cannot be ratified in part, unless there are severable obligations. In Forman v The Liddesdale [1900], the principal’s acceptance of his ship, which had been repaired without authorisation, did not constitute ratification as the principal had no choice but to ratify.

Limits of ratification

The potential harshness of ratification was illustrated by Bolton Partners v Lambert (1889), in which any agent accepted to buy goods from a third party. The third party subsequently withdraw their offer as the acceptance was unauthorised. The principal’s later ratification made the agent’s acceptance binding and the contract enforceable. Stricter limitations on the limits of ratification have been specified.

The Borviligant [2003] is the leading case of this topic, stating that ratification will be note permitted where it unfairly prejudices a third party. Certainly, if ratification would deny another person proprietary rights, it will not be permitted. Ratification will also not be permitted where time is of the essence: in Dibbins v Dibbins (1896), waiting 3 months to ratify a contract in which time was of the essence voided the ratification. According to Presentaciones Musicales v Secunda [1994], a principal may ratify timely legal proceedings.

Consequences of ratification

Permitted ratification retrospectively creates rights and obligations between principal and third party. These rights cannot be then taken away. Similarly, if a principal manifests his intent not to ratify, he cannot later ratify, according to McEvoy v Belfast Banking Co [1935]. Ratification also nullifies any breach of a warranty by an agent (see agents’ obligations on the next page). As the agent’s act is treated as authorised post-ratification, it was confirmed in Verschures Creameries v Hull and Netherlands Steamship Co [1921] that an agent is entitled to remuneration for ratified acts. The only question which could challenge the consequences of ratification is what happens if the principal is forced to ratify to prevent damage being caused to his commercial reputation. It is submitted that the principal should then have recourse against his agent.

Next: Obligations in agency

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