CREATION OF AGENCY BY RATIFICATION

The other way of creating an agency relationship is ratification. Ratification is approval or affirmation of prior unauthorized act. In order to legally bind another person by your act you should get prior authorization of a person on whose behalf you are going to act. However there are two instances where the act of an unauthorized person binds another person.

The first instant is when the principal affirms or approves the act done by his/her agent in excess of his /her authority. The second instant arise when a principal approves an act done on behalf of him by some one who has no prior authorization to do the act.

Ratification is a question of intent and the intent of the principal can be expressed either from his/her words or from her/his conduct. A principal is said to ratify unauthorized act of the agent by conduct when he, the principal:

accepts any performance under the agreement. This arises when a person enters   into contract on behalf of the principal exceeding or without having authority to do so.fails to repudiate the act of the agent with in a reasonable time.brings an action to enforce the act.

EFFECT OF RATIFICATION

What do you think is the effect of ratification?

Article 2192

Where the contract is ratified the agent will be deemed to have acted with in the scope of his power.

The ratified act of unauthorized agent has the same effect as an act done by authorized agent. Meaning the ratified act is considered as an act performed by the agent having prior authority to represent his principal. Once he ratifies the act, the principal will be bound by the act as if it was made upon his authorization. Before ratification, the act of the agent that exceeds his authority binds only the agent. The principal will not be bound by the act. But after ratification, the agent will be released from his liability both to the third party and the principal.

Ratification has a retroactive effect. Knowing the retroactivity effect of ratification is important in order to determine the time starting from which the act done by the agent binds the principal who ratified the act. The ratified act will be effective on the principal starting from the date on which the act was done by the agent not from the date of ratification onwards.

Illustration

W/ro Almaz is the sister of Ato Markos, a bakery around Shewaber, a market place in Harar. At the time w/ro Almaz went to visit Ato Markos, Ato Markos told her as to the increase in the market price of flour. One day w/ro Almaz met with Ato ketema, a wholesaler of flour, and ask him the price for one quintal of flour. Thinking that the price of the flour asked by Ato Ketema is cheap, w/ro Almaz entered into a contract of sale on behalf of Ato Markos with Ato Ketema.

In the case at hand w/ro Almaz entered into a contract of sale on behalf of Ato Markos without having the necessary authority to do so. Hence, Ato Markos is not bound by the contract unless he subsequently ratified the act of w/ro Almaz either expressly of impliedly. Until and unless the contract is ratified by Ato Markos the contract will remain binding on w/ro Almaz. But if Ato Markos subsequently ratify the act, for example, by accepting the delivery of the flour or by seeking performance from Ato Ketema, w/ro Almaz will be released from her obligation under the contract and Ato Markos will be bound by the contract as if he himself concluded it.

REQUIREMENT FOR RATIFICATION

 

There are conditions or elements that need to be fulfilled for the effectiveness of ratification. These conditions include, but are not limited to, the disclosure of the principal to the third party, capacity of the principal and the ratification of the entire act to by the principal.

In order to be effective the agent must have acted on the behalf of the principal. Meaning the agent who acted on behalf of the principal shall disclosed to the third party  that he/she, the agent, is doing the act on behalf of another person, the principal. The principal’s ratification of an act has no effect if the ratified act is not made for and on behalf of him, the principal.

Illustration:

Ato Negash is the general agent of Ato Mohammed. One day Ato Negash needs to buy 10 quintal of teff for his Hotel in Jijiga town and accordingly he went to Ato Haile, a famous dealer of teff in Harar, and entered into a contract of sale by his own name. According to their contract Ato Haile agreed to deliver 10 quintals of teff to Ato Negash at the house of Ato Mohammed and Ato Negash agreed to pay 400 birr for each quintal. At the due date of the contract Ato Haile delivered the teff to Ato Mohamed and the latter accepted the delivery. In this case the acceptance of delivery by Ato Mohammed doesn’t show ratification of the act by the same. Even if Ato Mohammed expressly declared the ratification of the contract, the ratification will not be effective since the contract is not entered initially on behalf of him.

The other condition for the effectiveness of ratification is capacity of the principal. The principal who ratified the act shall be capable both at the time the act was done by the agent and at the time of ratification. If the principal is incapable by the time a contract is concluded on his behalf by the agent, the ratification has no effect even if the principal becomes capable by the time he ratifies the act of the agent and the vice versa is true.

In order to be effective, the ratification of the act shall include the entire act of the agent. The principal may not ratify what is beneficial and repudiate what is burdensome. Moreover, the principal must be aware of all material facts; otherwise, the ratification is not effective.