Agency by Ratification is where Someone Adopts or Approves of Someone Else’s Actions on his Behalf After the Actions Take Place
Agents have the authority to act on someone else’s behalf. Typically, an agent acts with express authority from the very beginning to act on behalf of someone else. An agency by ratification is different, but let’s first look at an example of a typical agency relationship. Below, you can also find a video and examples of agency by ratification.
Let’s say Mr. Rich does not want to attend an art auction because he’s too busy counting money. He could instruct Annie to go to the auction for him and bid on the art. He’ll probably give Annie some instructions and then Annie, our agent, will have authority to bid at the auction on behalf of Mr Rich (Mr. Rich is called the principal). If she bids successfully Mr. Rich will have to purchase the art because Annie acted with authority on his behalf. This is a typical agency relationship where Annie acted as an agent on behalf of Mr. Rich.
An Agency by Ratification Occurs when Someone without Express Authority Acts on Another’s Behalf but that Action is Ratified, Meaning it is Adopted or Approved
Looking back at our example above, let’s say Annie goes to an art auction and bids on some art without speaking to Mr. Rich first. Or, let’s say she signs a contract as “Annie, agent of Mr Rich”, to purchase some art from a gallery. She had no authority to do either of these things at the time so Mr. Rich does not have to purchase the art. Annie did not have authority from Mr. Rich to act on his behalf.
However, what if Mr. Rich looks at the art and thinks that Annie got a good deal? Mr. Rich then goes ahead and accepts the art, pays the money, or engages in some other action to show that he approves of what Annie did. Even though Annie was not acting as an agent at the time she bid, the law says that Annie was now an agent by ratification. Mr. Rich ratified what Annie did by approving her actions on his behalf.
Becasue there is an agency relationship by ratification, we will pretend to go back in time and say that Annie was acting as an agent at the time she bid on or purchased the art. Mr. Rich’s approval of Annie’s transaction with the third party (the art auction or art gallery) created a relationship of agency by ratification between Mr. Rich and Annie. The video below introduces agency by ratification.
Examples of Agency by Ratification Cases
New York State Medical Transporters Ass'n v. Perales (NY 1990)
New York’s highest court held that Department of Social Services (principal) was not bound by actions of its agent who approved non-emergency transportation services because prinipal was unaware of the agent’s action and also did not benefit from it.
Klein v. Commerce Energy, Inc. (W.D. Pa. 2017)
Sklavos v. OKI-DO, Ltd. (NY Sup. 2018)
In this unpublished trial court decision from New York, the court held that the owner of a property, being aware of his agent’s actions in mortgaging a property, and failing to disclaim the action, ratified the agent’s activity and became bound by it.