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
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
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
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
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
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.
Law Article in India
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