Legal and Regulatory Rules governing agency by ratification  Although the law provides for an agent, exceeding his

Environment of brief at times, and has given the principal the power to ratify or disclaim such acts, it has also spelt
Business out the circumstances and rules under which such an act can or cannot be considered as agency by
ratification. The following are the rules governing the agency by ratification:
Notes
1. An act will be regarded as a ratification only if the principal had a free choice whether to do
it or not.
2. The agent must purport (intend to seem) to act as an agent [Section 196]. A principal can
only ratify acts that the agent purported to do on his behalf. This rule follows that if the
agent purports to act on his own behalf, the principal cannot ratify.
3. The person ratifying must have contractual capacity [Section 196]. This implies that the
principal must be competent to contract not only at the time when the agent exceeded his
authority but also when he ratified such act of the agent.
4. Ratification may be express or it may be implied in the conduct of the person on whose
behalf the acts are done [Section 196]. For instance, without A’s authority, his brother B
lends his house to C. Later on C pays the rent for the house and A accepts the same. By this
conduct B shall be deemed to have ratified the act of A.
5. The principal must exist when the act is done [Section 196]. Hence, a company cannot ratify
pre-incorporation agreements.
6. The principal at the time of ratification must have the full knowledge of the material facts
[Section 198].
7. The principal must ratify the whole of the transaction [Section 199]. This implies that he
cannot ratify at his will a part of the transaction and repudiate the rest. For example, A,
without B’s authority, lends B’s money to C on the term that C will repay the same in four
equal yearly installments along with an interest at the rate of 12 per cent to be calculated
on yearly reducing balance. Afterwards B accepts the first installment, and it amounts to the
ratification of the whole transaction.
8. The act must be ratified in time. A contract cannot be ratified after the time fixed for its
performance. If no such time is fixed, it must be ratified within a reasonable period of time,
from the principal’s acquiring notice of the unauthorised act.
9. Ratification cannot be made so as to subject a third party to damage [Section 196], or termi-
nate any right or interest of a third person [Section 200]. For example, A, not being author-
ised thereto by B, demands, on behalf of B, the delivery of a chattel, which is the property of
B, from C who is in the possession of it. This demand cannot be ratified by B so as to make
C liable for his refusal to deliver [Illustration (a) appended to Section 200].
10. The ratification should relate back to the actual date of the formation of the contract be-
tween the agent and the third party. In other words, it should have retrospective effect and
not prospective. For example, if A without being authorised thereto lends B’s money to C
and afterwards B ratifies the transaction. The contract will be deemed to have been ratified
by B on the date on which A lent B’s money to C.
11. Although ratification is not confined to lawful acts, an act, which is simply void in law, cannot
be validated by ratification. In other words, only lawful acts can be ratified [Section 196].
Effect of ratification  The effect of ratification is to put the principal, agent, and the third
party into the position that they would have been if the agent’s acts had been authorised from
the beginning. Ratification, in fact, relates back to the time of the unauthorised act and not to the
date when the principal ratified the said act. The doctrine of relating back is based on the assump-
tion that the unauthorised act is not a nullity; if it were, ratification itself would be ineffective either
because a nullity cannot be ratified or, the principal himself could not have validly done the act in
question, when it took place.

Agency by operation of laws

An agency, under certain circumstances, also comes into existence by operation of law. Such
an agency comes into existence neither by an express agreement nor by estoppel and ratifica-
tion, but by the provisions of the law of land. Partnership firm is an universal example of this
type of agency. When a partnership is formed, every partner, by operation of law, automatically
becomes the agent of other partners and the firm. Similarly, the promoters become agents of
Self-Learning the company they promote, MPs and MLAs become agents of their respective constituencies,
108  Material ministers become agents of governments, and so on.