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.
Whether the principal's ratification of an unauthorized act of one acting or claiming to act as his agent can make the contract enforceable as against the adversary party, is a question upon which there is a divergence of authority. If the adversary party has received a thing of value under the contract which he retains, it seems to be generally held that the principal can affirm and hold the adversary party to his executory contract. Thus where unauthorized loans have been made by state agents evidenced by notes, it has been held that the state may affirm the loan and enforce the notes.1 If the adversary party has not received anything of value under the contract, some jurisdictions hold that the principal can affirm and thus make the contract valid, even if the adversary party attempts to repudiate it.2 Thus where an insurance agent inserted unauthorized clauses in the policy, it was held that if the insurance company ratified the contract the other party could not avoid it.3 In other juristract may for any reason prefer to treat the contract as invalid." Andrews v. Ins. Co., 92 N. Y. 596, 604. In this case ratification was made as soon as the clause in question was called to the attention of the company; but such attention was called thereto by the adversary party's attempt to avoid the contract.
5 Fay v. Slaughter, 194 111. 157; 88 Am. St. Rep. 148; 56 L. R. A. 564; 62 N. E. 592.
6 Tecumseh v. Banking House, 63 Neb. 163; 57 L. R. A. 811; 88 N. W. 186.
7 See Sec. 606, 1236.
8 See Sec. 606, 607.
9 Hayward v. Langmaid, 181 Mass. 426; 63 N. E. 912.
1 State v. Shaw, 28 Ia. 67; State v. Torinus, 26 Minn. 1; 37 Am. Rep. 395; 49 N. W. 259.
2 Tiedeman v. Ledermann Freres (1899), 2 Q. B. 66.
3 Andrews v. Ins. Co., 92 N. Y. 596. "So long as the condition of the parties is unchanged, he cannot be prevented from such adoption because the other party to the condictions it is held that as such contract is not binding on the principal it is not binding on the adversary party, and the principal's ratification cannot increase the liability of such adversary party.4 The view entertained of such transaction by the Wisconsin courts seems to be that it does not even amount to an offer by the adversary party to the principal; but unless he ratifies and the adversary party then assents to such contract, no liability exists. Where this view is correct, ratification by the principal before the adversary party dissents does not make the contract valid. If the principal ratifies after the adversary party repudiates the contract it has been held that no liability attaches. Where the principal, A, had given oral authority to an agent B, to sell realty, which under the local statute was invalid because not in writing, and B makes a contract for the sale of such realty to X, X may disaffirm before A ratifies, and in such case he will not be bound even if A subsequently attempts to ratify such contract.5 Of course if the principal does not ratify, no liability attaches to the adversary party.6 If the adversary party acquiesces in the principal's ratification the contract is binding upon both.7 Since the adversary can hold the agent, who exceeds his authority only on the theory that he has been damaged in not obtaining the liability of the principal which he had contracted for, the principal's ratification relieves the agent from liability to the adversary party,8 except where the agent has so contracted as to incur personal liability in any event.
4 Townsend v. Corning, 23 Wend.
(N. Y.) 435. (A case of a sealed instrument, however; signed by the name of the agent alone.) Atlee v.
Bartholomew, 69 Wis. 43; 5 Am. St. Rep. 103; 33 N. W. 110; Dodge v. Hopkins, 14 Wis. 630.
5 Baldwin v. Schiappacasse, 109 Mich. 170; 66 N. W. 1091.
6 Davis v. Walker, 131 Ala. 204; 31 So. 554; Shuttleworth v. Development Co. (Ky.), 61 S. W. 1012.
7 Soames v. Spencer, 1 Dowl. & R. 32.
8 Bowen v. Morris, 2 Taunt. 374; Hale Elevator Co. v. Hale, 201 111. 131; 66 X. E. 249; affirming 98 111. App. 430; Roby v. Cossitt, 78 111.