Contract Liability - Ratification

Question 1

When is an agency relationship created by “ratification”?

Answer 1

When:

1. agent purports to act on behalf of principal without any authority; BUT
2. principal subsequently validates the act and becomes bound

Question 2

What is the effect of ratification?

Answer 2

Gives the transaction retroactive effect UNLESS:

1. the principal lacked contractual capacity at the time the agent entered into the authorized transaction; OR
2. retroactivity would interfere w 3rd party rights

UPON retroactivity –> the agent is relieved of liability for breach of duty AND his implied warranty of authority

Question 3

What are the pre-requisites for ratification?

Answer 3

1. principal must know (or have reason to know) all material facts
2. accept the entire transaction
3. and have the capacity (be competent and of legal age)

Question 4

In general, what are the methods of ratifying?

Answer 4

ratification may be express or implied through the conduct of the principal

Examples of conduct:

1. acceptance of transaction’s benefits
2. silence if there is a duty to affirm
3. suing on the transaction

Question 5

What may be ratified and by whom?

Answer 5

General Rule –> In general, a principal may ratify anything UNLESS:

1. performance was illegal at time of ratification; OR
2. 3rd party has withdrawn; OR
3. there has been a material change in circumstances