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Mercantile Laws-I

Notes same effect as if the act was originally done by his authority. Agency in such a case is said to be

created by ratification. In other words, the agency is taken to have come into existence from the

moment the agent first acted and not from the date of principal’s ratification. The rule is that

every ratification relates back and is equivalent to a previous command or authority.
Example: Lallan makes an offer to Badal, Managing Director of a company. Badal accepts
the offer though he has no authority to do so. Lallan subsequently withdraws the offer, but

the company ratifies Badal’s acceptance. Lallan is bound by the offer. The ratification by the
company relates back to the time Badal accepted the offer, thus rendering the revocation of the
offer inoperative. An offer once accepted cannot be withdrawn.
However, for the rule of relation back to apply, the agent while accepting an offer should not

show lack of authority, e.g., where he accepts, ‘subject to ratification’, the rule of relation back
does not apply and revocation shall be valid, if communicated prior to such ratifi cation.
Express and Implied Ratifi cation

The ratification may be express or implied.

Examples:
1. Amar without Puran’s authority lends Puran’s money to Kamal. Later Puran accepts
interest on the money from Kamal. Puran’s conduct implies ratification of the loan.

2. Amar without Puran’s authority buys certain goods for him. Afterwards, Puran sells those

goods to Kamal. Puran’s conduct ratifies the purchase made by Amar.
Requisites of a Valid Ratifi cation

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.

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