Page 118 - DCOM103_COMMERCIAL_LAW

Unit 12: Law of Agency

Requisites of a Valid Ratifi cation Notes

To be valid, ratification must fulfill certain conditions. These conditions are:
1. The agent must contract as agent; he must not allow the third party to imagine that he is
the principal. A person cannot enter into a contract at his own and later shift it to another.
2. The principal must have been in existence at the time the agent originally acted. This

condition is significant in case of a company. The preliminary contracts entered into by

promoters of a company on its behalf cannot be ratified by the company after incorporation
because, if permitted, ratification will relate back to the point of time when promoters

originally acted and at that time the company was not in existence. How can a person, not
in existence, be a party to a contract?
3. The principal must not only be in existence but must also have contractual capacity at the

time of the contract as well as at the time of ratification. Thus, a minor on whose behalf a
contract is made cannot ratify it on attaining majority.

4. Ratification must be made within a reasonable time. What is a reasonable time shall vary
from case to case?
5. The act to be ratified must be a lawful one. There can be no ratification of an illegal act or

an act which is void-ab-initio.
6. The principal should have full knowledge of the facts (S.198).

7. Ratification must be of the contract as a whole. The principal cannot reject the burden and
accept only the benefi ts.

8. Ratification of acts not within the principal’s authority is ineffective. This again is basically
relevant in case of companies. The acts of directors which are ultra vires the powers of a

company cannot be ratified by the company.
9. Ratification cannot be made so as to subject a third party to damages or terminate any right

or interest of a third person (S.200).

Examples:
1. Amar, not being authorised thereto by Bharat, demands on behalf of Bharat, the delivery
of some property of Bharat, from Cooper, who is in possession of it. This demand cannot

be ratified by Bharat, so as to make Cooper liable for damages for his refusal to deliver.
2. Amar holds a lease from Bharat terminable on three months notice. Cooper, an unauthorised
person, gives notice of termination to Amar. The notice cannot be ratified by Bharat, so as

to be binding on Amar.
Agency Coupled with Interest

Agency is said to be coupled with interest when authority is given for the purpose of securing

some benefit to the agent. In other words, where the agent has himself an interest in the subject-
matter of the agency, the agency is one coupled with interest.

Examples:
1. Agent is appointed to sell properties of the principal and to pay himself out of such sale
proceeds the debt due to the agent. The authority of the agent is agency coupled with
interest.

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