Even if the agent possessed no actual authority and there was no apparent authority on which the third person could rely, the principal may still be liable if he ratifies or adopts the agent’s acts before the third person withdraws from the contract. Ratification usually relates back to the time of the undertaking, creating authority after the fact as though it had been established initially. Ratification is a voluntary act by the principal. Faced with the results of action purportedly done on his behalf but without authorization and through no fault of his own, he may affirm or disavow them as he chooses. To ratify, the principal may tell the parties concerned or by his conduct manifest that he is willing to accept the results as though the act were authorized. Or by his silence he may find under certain circumstances that he has ratified. Note that ratification does not require the usual consideration of contract law. The principal need be promised nothing extra for his decision to affirm to be binding on him. Nor does ratification depend on the position of the third party; for example, a loss stemming from his reliance on the agent’s representations is not required. In most situations, ratification leaves the parties where they expected to be, correcting the agent’s errors harmlessly and giving each party what was expected.
The principal is liable on an agent’s contract only if the agent was authorized by the principal to make the contract. Such authority is express, implied, or apparent.Expressmeans made in words, orally or in writing; implied means the agent has authority to perform acts incidental to or reasonably necessary to carrying out the transaction for which she has express authority. Apparent authority arises where the principal gives the third party reason to believe that the agent had authority. The reasonableness of the third party’s belief is based on all the circumstances—all the facts. Even if the agent has no authority, the principal may, after the fact, ratify the contract made by the agent.
- Could express authority be established by silence on the part of the principal?
- Why is the concept of implied authority very important in business situations?
- What is the rationale for the doctrine of apparent authority—that is, why would the law impose a contract on a “principal” when in fact there was no principal-agent relationship with the “agent” at all?