Ratification

by
Agency

Submitted to: Submitted by:

Dr. Virender Negi Dishant Mittal
Roll no. : 130/15
Bcom LLB
2nd Semester
 Acknowledgment
I take this opportunity to express my profound
gratitude and deep regards to my teacher
Dr. Virender Negi for his exemplary guidance and
constant encouragement through out the course of
this assignment on the topic 'Ratification by Agency'.
Also I would like to express my special thanks of
gratitude to my director Mrs. Sangeeta Bhalla who
gave me this opportunity to do this wonderful
assignment.

Dishant Mittal
 Index
1. Meaning of Agency and Ratification
2. Section 196 of Ratification
3. Essentials for valid Ratification
4. Act done on the behalf of other
5. Principal should be in existence and
competent to contract
6. Ratification may be express or implied
7. Ratification with knowledge of facts
8. Ratification of whole transaction
9. Ratification not be injurious to third party
10. Ratification within a reasonable time
11. Effect of Ratification
Agency:-
An agency relationship has a tripartite structure. It involves the
principal, the agent and a third party. The agent acts on behalf of the
principal in relation to the third party. Consequently, an agent is said
to be a conduit pipe between the principal and the third party. In the
circumstance, the agent acts under the express or implied authority
of the principal. However, there are occasions when the agent acts
without the pre-knowledge of the principal. This places the principal
in a position to legally ratify the agent’s acts.

Ratification :-
Confirmation of an action which was not pre-approved and may not
have been authorized, usually by a principal (employer) who adopts
the acts of his/her agent (employee).

The ratification of the acts of the agent by the principal by definition

must be retrospective as it makes the principal bound by the
contract entered into by the agent without authority, as though the
agent had the authority of the principal in the first place. Thus, the
ratification cures the agent’s initial lack of authority when the
contract was entered into and creates rights between the principal
and the third party. On the part of the agent, the ratification makes
him entitled to some remuneration in respect of the transaction or
to be indemnified for losses incurred in the course of the transaction.
It is noteworthy that where the contract entered into by an agent is
in the form of a deed, the ratification too must be by deed

When an act has been done by one person on the behalf of another,
though without his authority or knowledge, the person on whose
behalf the act is done has the following options :-
Either (i) To disown the act, or
(ii) To ratify the same.

A person untruly representing himself to be the authorised agent of

another, and thereby inducing a third person to deal with him as
such agent, is liable if his alleged employer does not ratify his acts, to
make compensation to the other in respect of any loss or damage
which he has incurred. If a person falsely represents that he is an
agent of another, the principal may ratify the act even though the
same was done without his authority. On ratification, the principal
becomes bound by the act. If the principal does not ratify the act but
disowns it, the pretended agent is personally liable to the third
person, who had entered into the contract on the basis of the
misrepresentation made by the pretended agent.

It has been noted above that the person on whose behalf an

unauthorised act has been done has an option to ratify the act.
Ratification means according approval to the act by a person on
whose behalf the act is done. If the act done on the behalf of a
person although without the knowledge or the authority of that
person is ratified, the person ratifying the act becomes the agent,
although no such relationship, in fact, existed, at the time of doing
the act. Once the act is ratified is validity relates back to time of
doing the act.

Section 196 of Indian Contract Act makes the following provisions

regarding the right of a person to ratify an act which has been done
on his behalf and also regarding the effect of ratification :

Section 196. Right of a person as to acts done for him

without his authority. Effect of ratification: Where acts are
done by one person on behalf of another, but without his knowledge
or authority, he may elect to ratify or to disown such acts. If he
ratifies them, the same effects will follow as if they had been
performed by his authority.

Essentials of valid Ratification

1. The act should be done on behalf of another person. (Section
196).
2. The principal should be in existence, and competent to contract
when the act is done.
3. Ratification may be express or implied. (Section 197).
4. Ratification should be done with full knowledge of the facts.
(Section 198).
5. Ratification should be of the whole transaction. (Section 199).
6. Ratified acts should not be injurious to third party. (Section 200).
7. Ratification should be made within a reasonable time.

1) Section 196. Act done on the behalf of another:

According to Section 196 of Indian Contract Act, for the act to be
ratified, it is necessary that the name has been done on behalf of
the person who seek to ratify the same. A person cannot ratify
the an act done on behalf of his wife1. Similarly, if an agent acts
on his own account, such an act cannot be ratified by another
person. The point is explained by the case of Keighley, Maxsted &
co. v. Durant2. In this case, Keighely, Maxsted & co. instructed
Roberts to buy wheat on joint account, i.e. for them and himself,
at a certain rate. Wheat was not available to Roberts at that rate,
so he purchased wheat at a slightly higher rate. It was purchased
by Roberts on his own account only. Keighely, Maxsted & co.
1 Saunderson V. Griffins, (1826)
2 (1901) A.C. 240
 purported to ratify the agreement, but subsequently, when the
price fell, they refused to take delivery of wheat. In an action by
the seller for breach of contract against Keighely, Maxsted & co..,
it was held that they could not be made liable, because,
purported ratification by them was ineffective.

2) Principal should be in existence and competent

to contract: When a principal ratifies an act, the validity of
the act relates back to time of doing of the act by the agent. The
act is as valid as if the same had been done with prior authority of
the principal. So that ratification is valid, it becomes necessary
that the principal must have been in existence, and also
competent to contract., at the same time the act purported to be
ratified was done. Thus, if contract is purported to be made on
behalf of a company which has not yet been formed, the
company cannot ratify the contract after coming into existence.
In case Kelner v. Baxter, the promoters of the company, which
had not yet been formed, entered into a contract on the behalf of
the company. After the company was formed it ratified the
contract. Then the company went into liquidation. An action was
brought against the promoters to make them liable on the
contract. They tried to avoid their liability by pleading that after
the contract made by them had been ratified by the company,
their liability was over. It was held that since the company was
not in existence at time of the doing of the act, the purported
ratification was a nullity, and, therefore, the liability of the
promoters continued inspite of ratification. It is also necessary
that the act must have been done on the behalf of a principal,
who was capable of making the contract when the act was done.
 If an agent purports to make a contract on behalf of a principal,
who at the time is himself incapable of making that contract, the
principal cannot validate that contract by subsequent
ratification3. Similarly, a minor's agreement being void ab initio, a
minor on whose behalf a contract is made, cannot subsequently
ratify the contract and validate it. In this connection, the Privy
Council has observed :
" A ratification In law is treated as equivalent to a previous
authority, and it follows that, as general rule, a person, or body of
persons, not competent to authorise an act, cannot give it validity
by ratifying it."

3) Section 197. Ratification may be express or

implied : According to section 197 of Indian Contract Act,
ratification may be express or implied in the conduct of the
person on whose behalf the acts are done. This can be explained
in this way :

(a) The ratification where there is wording and expression is called

express ratification. For example: Without A`s direction, B has
purchased goods for the sake of A from C. There after, A has
given his Support to B`s activity, it is called ratification and now
A is principal and b is agent.
(b) The ratification where there is no expression is called implied
ratification. Here the mode of behavior of the party indicates
that support is given to activity concern. For example: Mr. Q has
P`s money with him. Without P`s direction Q has lent that
amount to R. Thereafter, R pays interest directly to P and P has

3 Ashubury Railway Carriage and Iron Co. Ltd. V. Riche, (1875).

 taken the amount of interest. It indicates that P has given his
support to Q`s activity.

4) Section 198. Ratification with full knowledge

of facts : According to section 198 of Indian Contract Act, no
valid ratification can be made by a person whose knowledge of
facts of the case is materially defective. The agent is expected to
disclose all the facts of the contract to the principal before the
principal can ratify the acts of the agent in relation to the
contract. In case Savery V. King, A entered into a mortgage
agreement on B's behalf. The agreement was invalid. Without
knowing this fact, B purported to ratify the transaction. It was
held that since B was not knowing about the invalidity of
agreement, the purported ratification of the same by him, was of
no effect.

5) Section 199. Ratification of whole transaction :

According to section 199 of Indian Contract Act, a person ratifying
any unauthorised act done on his behalf ratifies the whole of the
transaction of which the act formed a part. The object of this
provision is that no principal may ratify only those parts of the
transaction which are favourable to him, and disown others. If he
makes a ratification, it is deemed to be the ratification of the
whole of the act. For example, A, without B’s authority, lends B’s
money to C on the term that C will repay the same in four equal
yearly installments along with an interest at the rate of 12 per
cent to be calculated on yearly reducing balance. Afterwards B
accepts the first installment and it amounts to the ratification of
the whole transaction.
6) Section 200 Ratified act should not be injurious
to a third person : If a ratification of an act done without
the authority of a person would result in injury to the interest of a
third person, the ratification would be invalid. Section 200 of
Indian Contract Act, makes the following provision in this regard :
"An act done by one person on behalf of another, without such
other person's authority, which, if done with authority, would
have the effect of subjecting a third person to damages, or of
terminating any right or interest of a third person, cannot, by
ratification, be made to have such effect.

Illustrations
(a) A, not being authorized thereto by B, demands, on behalf of B,
the delivery of a cattle, the property of B, from C, who is in
possession of it. This demand cannot be ratified by B, so as to
make C liable for damages for his refusal to deliver.
(b) A holds a lease from B, terminable on three months' notice. C,
an unauthorized person, gives notice of termination to A. The
notice cannot be ratified by B, so as to be binding on A.

7) Ratification within a reasonable time : In order

that ratification is valid, it is necessary that the same must be
done within a reasonable time. Delay in Ratification could
prejudice the interest of the third person and, therefore, undue
delay in ratification should not be there. The concept of
reasonable period depends upon nature of the situation.
Effect of Ratification : The doctrine of Relations Back
The effect of ratification is to put the principal, agent, and the third
party into the position that they would have been if the agent’s acts
had been authorized from the beginning. Ratification, in fact, relates
back to the time of the unauthorized act, and not to the date when
the principal ratified the said act. The doctrine of relating back is
based on the assumption that the unauthorized act is not a nullity; if
it were, ratification itself would be ineffective either because a nullity
cannot be ratified or, the principal himself could not have validly
done the act in question, when it took place.

When the principal ratifies an act, which has been done on his behalf
but without his authority or knowledge, the same effects follow as if
the act had been performed with the principal's prior authority.
The validity of the act relates back to the time of the doing of the act.
In Risbourg V. Bruckner, the act of the agent which had been done
without the principal's authority was ratified by the latter. It was
held that on ratification, valid contract between the principal and the
third person was created from the date when the agent had done
the act, and, therefore, the agent could not be made personally
liable because the agent's position had become the same as in the
case of a previously authorised act.
Bibliography
 R.K Bangia, Indian Contract Act
 www.businessdictionary.com
 www.lawsofbusiness.com
 “ratification of contract” available at http://
www.getfreelegalforms.com/ratification.html 22/3/2016
 R.G. Padia. Pollock & Mulla’s Indian Contract and Specific Relief
Act
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