Story Case

Edward Ely was informed that John Stone was about to be appointed receiver of a certain milling company which had gone into bankruptcy. Ely believed that anything he would do in the name of Stone, receiver, would be acquiesced in later, if the act done was for the apparent benefit of the bankrupt concern. Ely, therefore, purchased a thousand bushels of wheat for Stone, receiver, on the strength of his belief that wheat would go up in value within a few days. A week later Stone was appointed receiver, and he ratified Ely's contract. Wheat, in the mean time had gone up in price and the seller refused to deliver, saying that no contract existed between himself and Stone, since Stone had not had the authority to make the contract at the time it was made. Is this a good defense?

Ruling Court Case. Krumdick Vs. White

"William Krumdick, during his last illness, executed a certain instrument in writing to Edmonds, authorizing him, as agent, to sell certain horses and wagons. After the death of Krumdick, Edmonds procured and sold the property in question to "White. In pursuance of the sale, possession thereof was delivered to White. This is an action by Jennie Krumdick, administratrix of "William, to recover the possession of the property in question and damages for its detention. She based her claim upon the fact that the death of "William terminated the authority of Edmonds, since it was not coupled with an interest. If his agency was terminated and his authority gone, the transaction obviously passed no title to the property to "White. White replied to this by claiming that she, as administratrix, ratified the sale by accepting a portion of the money when distributed by Edmonds. But, how can that be? At the time the sale was made and at the time Mrs. Krumdick made the alleged ratification she was not administratrix. There was, in fact, no one who could have authorized such a sale and, consequently, subsequent to the sale, it could not be ratified.

Ruling Law. Story Case Answer

One who ratifies must have been in existence when the contract was made. A person cannot ratify an act unless such person was in existence at the time the act was done, and had the capacity to act at that time. The case of Krumdick vs. White is a very neat, but somewhat technical, illustration of this point. When the agent sold the property in question, the owner and his former principal was dead. At the same time the administratrix was not in existence. So it was an act which could not, under any circumstances, have been ratified. This same point is also illustrated in cases where a person purports to do an act on behalf of a corporation not yet formed. When the corporation comes into existence, it may, acting through its directors, attempt to ratify the act, but it cannot do so, for there was no such principal in existence when the act was done.

In the Story Case, there could be no ratification because Stone, as receiver, was not in existence at the time the act was done. So the defense by the seller would be good.