AGENCY BY RATIFICATION
CONTENTS
1.0 Introduction
2.0 Objectives
- Main Content
- Validity of Ratification
- Mode of Ratification
- Effect of Ratification
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignment
7.0 References/Further Readings
INTRODUCTION
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.
OBJECTIVES
The objective of this unit is to know what is meant by agency by ratification its validity and the consequential effects, if any. This will also involve understanding the position of all interested parties i.e. the agent and the third party.
MAIN CONTENT
Ratification has been described as equivalent to antecedent authority and has been defined as the affirmation by a person of a prior act which was done or done on his account, whereby the act, as to some or all persons, is given effect as if originally authorized by him.
The doctrine of ratification was explained in Wilson v. Tunman (1843)6 MAN & G 236 as follows:
“ That an act done, for another, by a person not assuming to act for himself, but for such other person, though without any antecedent authority whatever, becomes the act of the principal if subsequently ratified by him, is the known and well established principle of law.”
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 with 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.
In the same vein, in Kelner v. Baxter (1866) L.R.2C.P.174, Erle, C.J pointed out in this respect that:
“The cases referred to in the course of the arguments fully bear out the proposition that, where a contract is signed by one who professes to be signing “as agent”, but who has no principal existing at the time, and the contract would be altogether inoperative unless binding upon the person who signed it, he is bound thereby and a stranger cannot by a subsequent ratification relieve him from that responsibility”.
This general common law position as stated in the two foregoing cases, though previously applicable to Nigeria, have been overruled by section 72 (1) of the Companies and Allied Matters Act of 1990. The effect of this provision is that the alleged principal must be in existence at the time the act was supposedly performed on his behalf. He needed not be named as identified provided it could be ascertained. This position was earlier stated in the English case of Watson v. Swann (1862)11 C.B. (N.S) 756 where Wiles, J., suggested as follows:
“The law obviously requires that a 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 description of him as shall amount to a reasonable designation of the person intended to be bound by the contract.”
The implication of this law is that infants and mentally incompetent persons would not be able to ratify acts purported to have been performed on their behalf in much the same way as they would not be able to appoint agents to perform those acts on their behalf.
The principal is expected to maintain his competence up to the time of the purported ratification. This is to the effect that there can be no ratification of an act which is ultra vires the principal or which although competent to perform it, at the time it was done on his behalf; he could no longer do the same at the time of the purported ratification. This was the position in Ashbury Railway Carriage & Iron Co. v Richie (1875) L.R. 7 H.L. 653.
The Legal Quality of the Act: The general rule here is that the principal may ratify any act which he could have authorized at the time the act was performed for and on his behalf. There are, however, certain facts which are not capable of ratification so that any purported ratification would not be binding even on the principal.
Therefore, an act which the principal could not authorize in the first place because it is illegal, ultra vires or contrary to public policy cannot be made to become valid and effective by ratification.
In Emmanuel Urhobo v. Chief J.S. Tarka (1976)11 CC HCJ 262, a Lagos High Court held that if a pre-incorporation contract be entered into by the company which did not exist at the time, the contract is a nullity and neither the company when formed nor the promoter whose signature was appended could sue or be sued on the contract and the company could not take any benefit under it.
Note however, that this common law position h as now been repealed b y section 72(1) of the Companies and Allied Matters Act of 1990. The section provides, inter alia, as follows:
“Any contract or other transaction purporting to be entered into by the company or by any person on behalf of the company prior to its formation may be ratified by the company after its formation and thereupon the company shall become bound by and entitled to the benefit thereof as if it had been in existence at the date of such contract or other transaction and had been a party thereto.”
However, the general rule still remains valid and effective as regards other situations other than company pre-incorporation contracts and other transactions.
Time or Period of Ratification: For amount of ratification to be valid and effective it must be performed within the time limit, if any, prescribed by the parties or by the nature and circumstances of the particular case or within a reasonable time. In Folashade v. Alhaji Duroshola (SUPRA) it was held, per curiam that a proper case of ratification is subject to the important qualification that ratification must be within a reasonable time after which an act cannot be ratified to the prejudice of a third party.
In some situations, the agent and the third party stipulate time for ratification. In such cases the principal can validly ratify only if he acted within the period so prescribed. In Metropolitan Asylum Board Managers v. Kingham & Sons (1890)6 T.L.R. 217, it was held that a contract must be ratified within a reasonable time after acceptance by an authorized person, and that such contract cannot be ratified after the date fixed for performance to commence.
Also the act constituting the ratification must have taken place when the act to be ratified could still, lawfully and effectively be performed. This issue came up in Bird v. Brown (1850)4 Exch. 786 where an agent of the seller of goods purported to exercise the right of stoppage in transitu over the goods sent to the buyer. This was subsequently ratified by the seller but that was after the buyer’s assignee had taken steps to interrupt and end the transit by the demand for possession and payment of the freight. It was held that the ratification came too late to divest the buyer’s assignee of their right to obtain possession of the goods. The transit could not be artificially extended by the doctrine of ratification.
Partial or Conditional Ratification: Opinion seems to be divided on this criterion for validity of ratification of an act done on behalf of a principal by the agent. The main issue here is the question of whether the principal could validly ratify some acts of his agent while rejecting others.
A school of thought is of the opinion that the adoption or acceptance by the principal of part of what the agent has done on his behalf amounts to ratification of all that had been done.
The others are of the opinion that there could be ratification of one or more of a series of acts by the agent without the principal being obliged to accept all of them.
The majority view is that for ratification to be valid and effective, it must be absolute and unconditional. This view is premised on the fact that an act of ratification must profess to adopt the transaction sought to be ratified in its entirety and absolutely without qualification. Therefore, a principal cannot ratify only the beneficial aspects of his agents’ act while declining those that are prejudicial to him. If he elects to ratify at all, he must do so for the entire transaction, otherwise his action will not amount to an effective ratification.
In Union BAnk of Australia Ltd. V Mclintock (1922) A. C. 1 It was held that the respondents could not ratify the act of their managers in obtaining the drafts, so as to have a title to sue without also ratifying his subsequent dealing with the drafts, the form of which made collection through a bank necessary.
Awareness of the Material Facts: Before a principal could validly ratify an act or series of acts done or performed on his behalf by an agent it is essential that there must be some objective evidence that the principal is aware or ought to be aware of the material facts constituting the act before electing to affirm it and to be bound thereby. Thus, in Phosphate of Lime V Green (1871)L.R. 7 C.P 43, Wiles, J. expressed this as follows:
“……. ratification to be binding must be either with full knowledge of the character of the act to be adopted or with intention to adopt it at all events and under whatever circumstances.”
In the same vein, in Marsh v. Joseph (1897)1 CH.D. 213, the Court of Appeal (English) held that to constitute a binding adoption or ratification of acts done without previous authority, full knowledge of them and unequivocal adoption after knowledge must be proved or else the circumstances must warrant the clear inference that the principal was adopting the acts of his supposed agent.
SELF ASSESSMENT EXERCISE 1
Enumerate and explain the conditions that must be satisfied before ratification can be valid.
Mode of Ratification
Generally, ratification requires the manifestation by the principal in some way, of his intention to be bound b y a prior unauthorized act of an agent. This, in most cases may be supplied by a clear and unequivocal adoptive act or by conduct amounting to acquiescence. Usually, an express approval of the transaction is the clearest evidence of ratification but sometimes, it may be supplied wherever the alleged principal accepts the benefit of the unauthorized transaction or otherwise obtains an advantage therefrom with the knowledge of the transaction.
In Mutual Aids Society Ltd v. Akerele (1965)1 ALL A.L.R. 336, the Supreme Court held inter alia that even if were to be assumed that the auctioneer was exceeding his authority in publishing the notice of sale of the respondent’s house, the silence of the appellant’s manager on the placing of the action notice on a wrong property over the notice of sale implied ratification of it on their behalf.
Positive acts provide the clearest and most satisfactory evidence of ratification. Accordingly, a voluntary acceptance or retention by the principal of the benefits of a transaction purportedly entered into by the agent for and on his behalf but without authority will generally establish ratification.
On the other hand, where the principal institutes an action or sets up a defense to an action against him, in reliance upon some prior unauthorized act of his agent, he will be deemed to have affirmed it.
In general, no formality is required in order to effectively delegate authority to another person. Therefore, ratification need not be in any special form or made in a form or manner proper for an original authorization.
SELF ASSESSMENT EXERCISE 2
How is ratification effected?
Effect of Ratification
Generally, ratification is retrospective in nature. It is treated as though it had been authorized from the onset. All rights and liabilities attaching thereto are in consequence said to relate back to the date of the original act. This doctrine of relation back was aptl y explained b y Lord Standale, in M.R. Koenicablatt V Sweet (1923)2 Ch. D 314 as follows:
“I think, it is settled law now that when once you get ratification it relates back. It is equivalent to an antecedent authority mandates priori acquiparator – and when there had been ratification the act that is done is put in the same position as if it had been antecedently authorized.”
The only exception to this principle of relation back is that ratification would not have this effect where to do so will prejudice an innocent third party who has, in the interim acquired a right or benefit under the transaction.
Ratification strictly speaking is not a method of appointing an agent but a means whereby an agency relationship may arise. It therefore relates only to past acts and does not thereby become a license or further authorization to perform similar or even the same act in the future.
It does not thereby constitute the agent into a general agent of the principal. Consequently, no formal termination of such agency relationship is called for, required or necessary.
SELF ASSESSM ENT EXERCISE 3
Discuss the effects of ratification
CONCLUSION
As noted above, agency by ratification is created when the act of a supposed agent is subsequently acknowledge and when this is done, the principal will be deemed to have initially authorized the action in the first place. Th is is the concept of ratification and learners are expected to identify this.
SUMMARY
Learners must know that there cannot be ratification without a prior action done on behalf of the principal who later comes forwards to acknowledge the action of the agent with third partied.
TUTOR-MARKED ASSIGNMENT
- Examine, with the aid of judicial authorities, agency by
- What are the essential ingredients for the validity of ratification?
REFERENCES/FURTHER READINGS
Pollock and Maitland. “The History of English Law,” Vol. 11.
Walker, D.W. (1980). “The Oxford Companion to Law.” London: Butterworths. American Restatements, Second, Agency, Article.
Friedman, G.H.L. (1984). Law of Agency, 7th Edition. London: Butterworths. Companies and Allied Matters Act (1990). Laws of the Federation of
Nigeria.