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Agency Law: Ratification by the Principal can lead to Agency (Part 2 of 2)

Thursday, 24 May 2012

Following on from Part I, in which we set out the definition of ratification and the conditions required for it to be applied, we now examine what actions are capable of being ratified, how ratification is applied and its legal effect.

What Actions Can be Ratified?

The actions that may be ratified are relatively wide in scope and will include most actions that the principal is capable of doing itself. This includes anything that is not void at inception, even those actions that might be illegal or actions that cause some sort of tort or distress to another party.

Contracts that were entered into in different circumstances where the circumstances have changed are not excluded from the principles of ratification. Case law is littered with examples of contracts that have been ratified despite significant changes in circumstances. Early cases include marine insurance contracts where a loss has actually occurred at the time of ratification for example.

How is an Action Ratified?

In addition to the three pre-conditions outlined in Part I, there are two further criteria that must be met once a decision to ratify has been made:

  • It must occur within a reasonable time.
  • It cannot be partial, the whole contract must be ratified.

Ratification need not be made expressly, it can take various forms. It may be expressed in writing or orally or it can be implied from conduct. For ratification to be valid the principal must be in full knowledge and understanding of the facts. Acts of ratification must be clear.

Legal effect of Ratification

If the required conditions are met and the principal has clearly ratified the actions of the agent, then the position becomes that which would have occurred had the agent had authority in the first instance. In other words the principal-agency relationship is formalised and the contract is formalised between the principal and the third party contractor.

Ratification is retrospective in effect so that the contract is then treated as though it were authorised from its commencement.

If you need advice in respect of agency law or other contractual issues, Rollingsons has experienced lawyers who can assist you; for more information please contact James Crighton via e-mail or by telephone on 0207 611 4848.