If one acts as an agent and yet without authority, the party for whom he purported to act may hold the third person, and is himself liable to such third person, by an election to stand by and affirm what the agent has done in his behalf.
One cannot be held by the act of another unless he has really or apparently authorized that other to represent him in the matter in question. One who acts as an agent may have no authority, or, having some authority, may not have the particular authority requisite to the case at hand. In such a case the principal is not bound unless he cares to ratify what has been done in his behalf. If he does ratify, he becomes bound as though the agent had had previous authority, and the third person becomes bound to him. The lack of authority has been supplied. This is no injustice upon the third person as it merely brings matters t6 the state in which he supposed they were or wanted them to be when he assented to the supposed agreement. But in almost every case in which ratification is claimed, it is claimed by the third person against an alleged principal who pleads lack of authority.
Ratification rests upon the broad general principle that as a matter of practical justice, one who has assented to the act of his supposed agent will not be allowed to afterwards disclaim it upon the technicality that at the time the agent acted there was lack of authority which would have justified repudiation by the principal had he chosen to disclaim.
Ratification is thus seen to be nothing technical; the rules governing the subject are given below.
To constitute ratification there must be the following facts: (1) The agent must have acted as agent; (2) The act must be one that could have been authorized; (3) The ratifier must have been in existence when the contract was made; (4) The ratifier must be fully informed as to the facts; (5) Ratification must be of the entire act; (6) Must be before the other party's withdrawal, and (7) Must be in the form required of previous authorization.
The essentials enumerated above are briefly considered below:
(1) The agent must have acted as agent.
Example 5. A, acting as principal and having no authority from P to represent him, buys on his own credit, corn from T. P afterwards arranges with A to take the corn, and T, learning of the arrangement and of the fact that P has actually obtained the corn, sues P. In this case T has no contract with P and seeks to hold P on the theory of ratification. But T extended the credit to A. There was no agency or appearance of agency and P's liability is to A, not to T.21
(In the above example if A had really been P's agent, although concealing the fact, P could be held on the theory that although the agency was concealed, still P was in fact the real party in interest, and as he takes the benefits ought to be held to the burdens. See subject Undisclosed Agency, post.)
21. Keighly v. Durand, L. R. 1900 A. C. 240.
(2) Act ratified must be one that could have been authorized.
What one cannot authorize in the first instance, he cannot ratify. Thus, illegal agencies cannot be ratified.
In the same way one cannot become liable upon a tort merely by assenting to it afterwards, even though it may have been done in his behalf by one who called himself, but was not, agent.22 Nevertheless, if a lawful act is done by one as agent, and incidentally thereto he commits a tort, the principal will be liable for the tort if he adopts the act, for the act must be adopted as an entirety, with its shortcomings as well as with its advantages.
Example 6. A, without authority, sells and delivers coal to B, ostensibly as P's agent. In unloading the coal he breaks a window. P ratifies the sale and delivery by accepting the price. He is liable for the tort.28
(3) Ratifier must be in existence when contract is made.
One cannot be an agent of another who doesn't exist. Therefore it is said that it is essential to ratification that the principal be in existence. But in cases of corporations yet to be formed, it is said they may become liable upon the contracts of promoters and incorporators by adoption.
(4) Ratifier must be fully informed.
That one may be held by ratification he must be fully informed of all the material facts.24
22. Dempsey v. Chambers, 154 Mass. 330.
23. Dempsey v. Chambers, 154 Mass. 330.
24. Combs v. Scott, 94 Mass. 493.
Information, however, may be special or general. One cannot remain in wilful ignorance of details in order not to be bound the while he knows there are facts of which he chooses to remain in ignorance, receiving the benefits.
Example 7. A makes a lease in P's name. P enters upon and enjoys the premises. Being sued for the rent he claims that A had no authority and that during the time it is sought to hold him he did not know the terms of the lease. He is bound.25
(5) Ratification must be of entire act.
The principal cannot divide the act into parts, ratifying those that suit him and disclaiming the balance.26 This is very apparent if we remember that ratification merely supplies prior lack of authority and therefore must operate as prior authority would have done had it existed.
It follows that if he ratifies part he ratifies all. Thus, if the act involves a tort, we have seen that the ratification of the act is a ratification of the tort.
(6) Ratification must be before withdrawal by the other party.
The principal not being bound because the agent lacked authority unless he chooses to ratify, it follows that the third party may also disclaim if he does so before the authority is ratified.27 Otherwise we would have the anomaly of the third person being bound, and the alleged principal not bound.
25. Ermantraut v. Robinson, 52 Minn. 333.
26. See Ratification by Receiving Benefits.
27. There is difference of opinion on this subject, but the weight of authority is as stated. See Mechem, Agency, 2nd Ed. Sec. 522.
(7) Ratification must be in the form required of previous authorization.
If the authority lacks sufficient form, the lack is there whether the authority be conferred yesterday or tomorrow. Thus, if the execution of a sealed instrument by an agent requires a sealed authority, a ratification must be under seal.28 The statute of frauds in some states requires the authority to sell real estate to be in writing. Held, that whether the authority is conferred antecedently or by ratification, it must be in writing.29
But it is also held, that where a mere formality is required (as in the two illustrations given) a principal might by conduct in receiving benefits be estopped to insist upon the formality.30