Understanding Agency by Ratification
Insuranceopedia explains the meaning of Ratification as follows.
Ratification is when one person gives another person the authority to act on their behalf and in their absence. Ratification allows the person to cover any acts done in the past by backdating the Ratification. This Ratification makes the entity responsible for any consequences or liabilities that develop from these unauthorized acts. Liability is given to this entity for any contracts made by them in the absence of another person.
An Example of Agency by Ratification or Ex Post Facto Agency
An actor (the Principal) and the actor’s manager (Agent by Ratification)
The actor gives their manager authorization to represent them in their absence from the beginning. The actor gave their manager authorization to sign contracts and act on their behalf, pre-dating the Ratification. The manager, of course, must be liable for their actions as they have the permission to act on behalf of their client, the actor. The actor gives their manager express authority from the beginning to act on their behalf, to sign contracts and legal papers.
Another scenario is as follows. The actor does not want to attend a business meeting where contracts will be signed for an upcoming movie. The actor sends their manager to do their bidding and sign necessary agreements. The manager now has the authority to sign papers on behalf of the actor. The actor must follow through with this movie contract because they authorized the manager to sign the contracts.
If the manager signed these contracts in the actor’s absence, they did so without express authority to act on the actor’s behalf. This action is then Ratified, which means the acts of the manager are adopted and approved. This unauthorized act is called an agency by Ratification.
The manager went to this meeting and signed all the necessary contracts without express authorization; the manager had no authority to act on behalf of the actor. Thus, the actor does not have to follow through with the signed contract because they never gave their express consent to sign. However, after reviewing all the manager’s actions, the actor felt that the manager made an excellent and sound decision on their part. The actor can accept the signed contract because this act was approved. The actor can go back in time and say that they supported the agreement signed by their manager. There is now a relationship of agency by Ratification between the actor’s manager and the actor.
An agency by Ratification arises when a person not authorized acts on behalf of another person or agent and declares they are authorized to do business in the other person’s absence. The other person or Principal can claim that this person had no authority to act on their behalf. The Principal can disown these acts.
The Principal can base that person’s actions as an agent by Ratification as though the person had the authorization to transact all business matters on their behalf.
An agency by Ratification, also known as ex post facto agency, occurs after an unauthorized event.
It takes a seasoned attorney’s expertise to sort through the laws that provide an agent who exceeds his brief. The laws give the Principal the power to ratify or disclaim certain acts.
Medical Power of Attorneys
Another example is a Medical Power of Attorney where Mrs. Smith wrote out all of her desires for medical care if she can no longer make medical decisions for herself. In this case, Mrs. Smith names her daughter, Mrs. North, to advocate for her and follow her mother’s medical care instructions. Mrs. Smith needed to be of sound mind when writing out her medical instructions. Mrs. North acts as an agency by Ratification and directs all medical staff in her mother’s care.
An Agency of Ratification Falls Under the Following Rules
- The Principal had a free choice as to an act regarded as a Ratification.
- The Principal’s agent must act on behalf of the Principal.
- The agent must act in a contractual capacity. The Principal must have been competent to contract when the agent exceeded their authority and when the Principal ratified the agent’s act.
- The conduct of the person who acted on behalf of the Principle can be expressed or implied.
- When the act is done, the Principal must exist.
- The Principal must have full knowledge of all the facts at the time of Ratification.
- The Principal cannot Ratify part of a transaction.
The Principal must Ratify the whole transaction.
The Principle cannot accept parts of the contract and deny the rest.
- Ratification must be done in time. If there is no specified time, it must be ratified within a reasonable time from the unauthorized act.
- No Ratification can take place when it affects a third party.
- The Ratification needs to backdate to the actual formation of the contract.
- Acts void in law cannot be validated by Ratification. You can only validate lawful actions.
- The Principal, agent, and third party must be in the correct position as though the agent’s acts were authorized from the beginning. Ratification relates to the unauthorized act’s date and not the date that the Principle ratified the act.
- A legally voided act cannot be Ratified. If it were Ratified, it would be ineffective.
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