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Agency By Ratification

Agency by Ratification is applicable when a person (agent) acts on behalf of another individual (principal) without his permission or knowledge. It states that even though the agent agrees without the principal�s consent, the principal may later ratify, the benefits and obligations of a contract formed on his behalf. Thus, Ratification is a method for verifying unsanctioned conduct. Section 196-200 of the Indian contract act, 1860 deals with ratification.

By ratifying the contract, a person acknowledges the agency which may include favourable provisions, thus being an important section in the Indian contract act.

There are some issues in the agency by ratification for which the study of the same becomes important. Firstly, Section 196 of the Indian Contract Act of 1860 stipulates that an unauthorised action must be ratified within a reasonable amount of time but it doesn't define what a reasonable duration is. Also, the only person who is granted the authority to authorise an unauthorised act is the principal, thus he has to be aware of the act done by the agent without his consent. Moreover, the agent is accountable for any unauthorised acts until they are ratified.

Ratification of the agency includes the following possibilities. Firstly, even though a person was operating as an agent and had a principal in his mind, the former was not, in reality, the latter�s agent at the time of the agreement since no prior authorisation had been obtained. Second, when a person entered into the contract as an agent but acted outside of the scope of his power. In either scenario, a validly made ratification puts the parties in the same scenario that they would have been in if the agent possessed the principal�s assent when the agreement was formed.

There are some conditions for ratification of the agency. Firstly, the act in question must have been performed on behalf of the party seeking to ratify it. The agent must state that they are acting in both their capacity as an agent and in the representation of a specific principal.

The actions that can be ratified are specified in Section 200 of the ICA. Only legal activities are eligible for ratification and actions that may harm others cannot be ratified. Section 199 stipulates that an individual cannot ratify only the components of the agreement that benefit him and reject the remaining portions.

Another American article describes the ratification in the agency when the principal is unaware of important information. It emphasises the necessity of providing the principal with all pertinent details before ratification, which is identical to S. 198 of the Indian Contract Act, which states that anybody ratifying someone's action must be fully informed of all important facts. A person's ratification is rendered invalid if they do so without having a thorough understanding of the case's contents.

Another article states that the cases of obtaining an ambiguous right against some principal by an unauthorised act of his agent and obtaining the assent of the unapproved conduct performed by the agent for bringing about an allegation against a third party vary considerably. By approving this, the principal can obligate himself but he cannot bind the other party. This is the view of American law. Whereas, according to Indian laws, the principal is responsible for actions taken by the Agent on behalf of the third person if he approves the contract between the Agent and the third party. If the principal rejects the ratification, the agent will be held personally responsible for all actions.

Agency by ratification relates to ratifying the act done by the agent of the principal without the latter�s permission. Section 196 relates to this explanation. The principal may choose to ratify the agent�s activities which may be done either expressly or impliedly as stated in section 197 of ICA.

The agent should have undertaken the action on behalf of the principal and the principal must possess the legal competence to enter into a contract or accept legal responsibility, and he must have the freedom to approve or reject the agent's activities. While ratifying the act, the principal must be fully informed of the circumstances and he must approve of all of the agent's acts. The ratification cannot infringe on the rights of third parties.

Agency through ratification is subject to the following restrictions: The act has to be ratifiable. It cannot be ratified if the conduct is unlawful or against public policy. When the principal becomes informed of the act, he must ratify it as soon as reasonably possible. The principal must approve an action, carried out without his consent, establishing a contractual connection between him and the third party. This is useful when an agent acts on behalf of the principal without his permission when he is unable to operate on his behalf himself.

In the case of Krighley Maxeted & Co V. Durant, K.M. & Co. ordered their agent to purchase Karachi wheat on their joint account at the predetermined prices. However, wheat was not available at such prices. For a greater price, he purchased wheat from Durant. The agent entered into the contract under his name. The principal accepted this however, they did not accept the shipment when the wheat price dropped. Durant sued the principals and the agent for breach of contract. Since the agent entered into the contract in his name, it was decided that the principal was not responsible. Here, the agreement failed to be ratified because the agent negotiated in his name rather than acting on behalf of the principal.

In another case, Sunil V Maharashtra state mining corporation, the managing director of a corporation fired an employee without giving any substantive reason. The Director responded that he held considerable autonomy since he is the Company's Agent when the employee doubted his authority, but the Corporation still approved the Managing Director's actions. When the case came before the court, the judge ruled that the dismissal was unlawful and that a business could not approve a move that violated both company policies and a worker's rights and had an unlawful goal.

In the case of Grover and Grover Limited V. Mathew's, X placed his products in Y's hands. As X's representative and to engage in an insurance policy, Y went to an insurance firm. X didn't approve this contract. X approved the arrangement when the items caught fire and subsequently went to the insurance company to make a claim. However, the company stated that X failed to ratify the contract within a reasonable amount of time, where such a period would be any time before the happening of the incident and thus X was not given compensation.

Agency by ratification is a legal principle recognised by the Indian Contract Act that is crucial in governing contractual interactions among individuals. It has substantial legal consequences on the execution and legitimacy of contracts, as well as on the duties and rights that each party has. The relationships between the principal and the agent and the principal and the third party are both established through ratification of the agency. The ratification of agency procedure might be complicated; thus, both the principal and the agent must be aware of their obligations under the Indian Contract Act, of 1860.

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