Creating Agency by Ratification

Agency by ratification exists where one person, the agent acts on behalf of another, the principal who at the relevant time was not aware of the action of the agent but later acknowledges the action by ratifying same. By this action, he is bound to be liable to the principal as well as to take all the advantages that comes with it.

Agency by ratification can arise in any one of the following situations:

        i.            An agent who was duly appointed has exceeded his authority; or

      ii.            A person who has no authority to act acted as if he has the authority.

When one of the above said situations arise, the principal can either reject the contract or accept the contract so made. When the principal accepts and confirms such a contract, the acceptance is called ratification. Ratification may be expressed or implied.

The effect of ratification is to render the contract as binding on the principal as if the agent had been properly authorized beforehand.

The doctrine of agency by ratification can be simply illustrated thus:

If Ayo, unauthorized by Bola, with Charles, which Bola afterwards recognizes and adopts, there should be no difficulty in dealing wit it as having been originally entered into with Bola’s authority. Charles undoubtedly entered into the contract on the understanding that he was dealing with Bola, and when therefore Bola subsequently agrees  to  admit that such  was the case, Charles was precisely put  in  the situation in which he was understood to be.

This doctrine must not be confused with and must therefore be distinguished from the doctrine of undisclosed principal. This is because the law permits an undisclosed principal, on whose behalf a contract has been entered into, to be liable on the contract. The effect of ratification is equivalent to previous mandate and a person who ratifies a contract entered into on his behalf is essentially in the same position as an undisclosed principal.

Validity of Ratification

For ratification to be successfully raised, it is required that the purported act of ratification must be valid, effective and binding on the alleged principal.

To acquire these qualities, the purported ratification must fulfill or meet certain criteria. These include:

Act Must be on Behalf of the Principal: For  a  successful  establishment of act of ratification, the act of ratification can only be validly executed by the alleged principal for and on whose behalf the act was originally performed.

In FOLASHADE V ALHAJI DUROSHOLA (1961)1 ALL N.L.R. 87.

It was held, per curiam, that there could be no ratification unless  a  person purported to act as an agent and to act for a particular person.

However,    in    respect   of   contracts,   the   law   is   very   different. 

In KEIGHLEY MAXSTEAD  &  CO.  V DURRANT (1901)  A.C.  240. The

House of Lords unanimously held that a contract made by a person intending to contract on behalf of a third party, but without his authority, cannot be ratified by the third party, so as to render himself liable to sue or be sued on the contract, where the person who made the contract did not profess at the time of making it to be acting on behalf of a principal.

Existence of a Competent Principal: For an act to be rectifiable, the supposed principal must be in existence at the time the act was supposedly performed for and on his behalf. It follows that the supposed principal must be a person in law. That means he must be living or be a subsisting juristic person. 

In CALIGHARA V GIOVANNI & CO. LTD (1961)3 ALL N.L.R. 534; it was held that a company cannot ratify a contract purported to have been entered into on its behalf by the promoters prior to its incorporation.

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