This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In order that there may be ratification, the party who is defrauded must act with full knowledge of the facts.1 If A has obtained insurance by misrepresenting his age, and by misrepresentation as to the fact that other companies have rejected him as a risk, the fact that the insurance company received premiums from him after it had the means of knowing that such statements were false does not amount to a ratification if such means of knowledge was derived from information which was furnished by one who was assisting A in obtaining such insurance.2 The fact that the party who has been defrauded suspects, after the transaction is completed, that fraud exists, does not make his delaying rescission until he can determine the existence of such fraud amount to a ratification.3 Acts done before the discovery of the fraud can not constitute ratification.4 However, acts done after the fraud is discovered, but before the defrauded party has discovered all the evidence tending to prove fraud, may amount to a ratification.5 It is said that one who is induced to buy an orchard by false representations as to the returns therefrom during the preceding year, is put upon inquiry when he ascertains that the proceeds for the first season after the purchase are much less than the returns as represented; and if he delays rescission until the third year, such delay operates as a ratification.6
2 Metropolitan L. Ins. Co. v. Freed-man, 159 Mich. 114, 32 L. R. A. (N.S.) 298, 123 N. W. 547.
3 Hall v. Catherine Creek Development Co., 78 Or. 585, L. R. A. 1916C, 996, 153 Ac. 97.
4 England. Bartram v. Lloyd, 20 Times Law R. 281.
Alabama. Alabama, etc., Works v.. Dallas, 127 Ala. 513, 29 So. 459.
Georgia. Davis Sewing Machine Co. v. Crutchfield, 117 Ga. 873, 45 S. E. 228.
Iowa. Coles v. Ry., 124 la. 48, 99 N. W. 108.
Kentucky. Louisville & N. R. Co. v. Helm, 121 Ky. 645, 89 S. W. 709.
Massachusetts. Fitzmaurice v. New York, New Haven & Hartford R. R. Co., 192 Mass. 159, 116 Am. St. Rep. 236, 6 L. R. A. (N.S.) 1146, 78 N. E. 418.
Minnesota. Oestreich v. Chicago, St.
Paul, Minn. & Omaha Ry. Co., 140 Minn. 280, 167 N. W. 1032.
North Dakota. Liland v. Tweto, 19 N. D. 551, 125 N. W. 1032.
Oklahoma. Gilpin v. Netograph Machine Co., 25 Okia. 408, 29 L. R. A. (N.S.) 477, 108 Ac. 382.
Pennsylvania. American, etc., Ins. Co. v. Judge, 191 Pa. St. 484, 43 Atl. 374.
West Virginia. West End Real Estate Co. v. Nash, 51 W. Va. 341, 41 S. E. 182.
Wisconsin. Bostwick v. Ins. Co., 116 Wis. 392, 92 N. W. 246.
The fact that a party who has been induced by fraud to give notes, is induced to give other notes in renewal thereof before such fraud is discovered, does not prevent him from interposing fraud as a defense. Gilpin v. Netograph Machine Co., 25 Okia. 408, 29 L. R. A. (N.S.) 477, 108 Ac. 382.
5 Simon v. Shoe Co., 105 Fed. 573, 52 L. R. A. 745, 44 C. C. A. 612; Munich Re-Insurance Co. v. Surety Co., 113 Md. 200, 77 Atl. 579.
Notice as an element of ratification must be actual notice. Constructive notice, as is obtained by being a cashier of a bank,7 is not the equivalent of knowledge, so as to make acquiescence amount to ratification.
Discovery of one false representation is not constructive notice of the falsity of other representation not yet known to be false.8