Subsequent adoption of an activity is called ratification. Soon after ratification, the person who has done the activity becomes agent and that person who has given ratification becomes principal.
Ratification is of two types. Namely;
- Express Ratification and
- Implied Ratification.
The ratification where there is no expression is called implied ratification. Here the mode of behavior of the party indicates that support is given to activity concern. For example: Mr. Q has P`s money with him. Without P`s direction Q has lent that amount to R. Thereafter, R pays interest directly to P and P has taken the amount of interest. It indicates that P has given his support to Q`s activity.
Essentials of Valid Ratification:
- The person, who is going to give ratification, must be in existence at the time of activity. Let us consider pre-incorporation contracts made by promoters. Company comes into existence on the date of incorporation. Therefore company is not in existence at the time of pre-incorporation contracts. If company gives ratification to pre incorporation contracts, it is not valid ratification. Hence to pre-incorporation contracts, promoters are personally liable.
- The person who is going to give ratification should have capacity to contract, at the time of activity as well as at the time of ratification. In Armugan Vs Dorai Singh the minor obtains loan from money lender and executes a deed. Before repayment of debt, he becomes a major and executes another bond. Court decides that the second bond also is not valid because the person who has given ratification has no capacity to contract at the time of activity i.e. at the time of getting loan.
- Ratification should be given within reasonable period after the activity the concept of reasonable period depends upon nature of the situation.
- Ratification must be absolute. To entire activity ratification is to be given. Partial ratification carries no validity.
- The fact of ratification must be communicated to all parties in connection with the activity.
- Ratification attains validity only when it is given with full knowledge of facts relating to the activity.
- The activity which is going to be ratified must be a lawful activity. For example: for the sake of A, B has murdered C. If A gives his support to B`s activity, it is not valid ratification.
- The person who is going to give ratification should have right to do such activities. For example: If company gives ratification to an Ultravires activity it is not valid.
- Ratification relates back to date of activity. Though ratification takes place after the date of activity, it will be assumed that ratification is given on the date of activity.
- Ratification should not lead to breach of contract. In other words ratification should not be harmful to third party. For example: There is a rental agreement between A and B according to which three months notice is needed at the time of vacation of house. On one day C, A`s son, has asked B to vacate the house on that day itself. A has given his support to C`s activity. It is not valid ratification because it leads to breach of rental agreement and at the same time it is harmful to B.