Categories: Court Info

Ratification of a Contract: Making an Agreement Valid

Key Takeaway: Contract Ratification

Contract ratification is the formal or implied act by which a party confirms and accepts the terms of an agreement, making it legally binding, especially when the contract was initially voidable or made without proper authority. It transforms a defective or tentative agreement into an enforceable legal obligation, often retroactively, and waives any prior right to void the contract. Understanding this concept is crucial for managing legal and financial risk in business and personal transactions.

Understanding Contract Ratification: A Guide to Validation

In the complex world of legal agreements, not every document starts out as a fully enforceable contract. Sometimes, an agreement may be executed under questionable circumstances, such as lack of legal capacity, duress, or unauthorized representation. This is where the powerful legal principle of contract ratification comes into play. Ratification is essentially the act of approving or validating a contract that may have been previously defective or unauthorized, transforming a tentative agreement into a legally enforceable one.

This post will explore what ratification means in contract law, the critical elements required for it to occur, and the significant legal consequences that follow this formal or implied approval.

What is Contract Ratification?

Ratification is the knowing sanction or affirmation given to an act that would otherwise be unauthorized and not binding. It is the process by which a party consents to and agrees to be bound by the terms of a contract after it has already been executed or performed, even if they were not initially bound by it.

The concept is most frequently applied in two main scenarios:

Unauthorized Agency: When an individual (the agent) enters into a contract on behalf of another party (the principal) without having the necessary or full authority to do so. The principal can later ratify the unauthorized act, thereby accepting the benefits and obligations of the agreement.
Voidable Contracts: When a contract is inherently voidable due to a legal defect, such as being entered into by a minor, under duress, or as a result of misrepresentation. The party with the right to void the contract can choose to later ratify it, thereby giving up their right to cancel the agreement.

ⓘ Tip from a Legal Expert

Ratification cannot be used to validate a contract that is void ab initio (from the beginning), such as an agreement whose subject matter is illegal or contrary to public policy. Ratification only applies to contracts that are merely voidable or unauthorized.

The Essential Elements of Valid Ratification

For a ratification to be legally effective and binding, several key elements must be present. A failure in any one of these areas can prevent the agreement from becoming fully enforceable.

Full Knowledge of Material Facts: The party ratifying the contract must be fully aware of all the material terms, facts, and circumstances of the agreement, including the unauthorized nature of the prior act. A person cannot ratify an act they are ignorant of.
Clear Intent to Approve: The party must clearly express the intention to approve and be bound by the entire agreement. This unambiguous expression of intent is crucial.
Acceptance of the Whole Contract: Ratification must apply to the entire contract, not just the beneficial parts. A party cannot selectively ratify the parts they like and reject the parts they don’t.
Voluntary Action: The ratification process must be entirely voluntary. If a party is coerced or under duress when ratifying an agreement, the ratification itself may be deemed voidable.

Express vs. Implied Ratification

The act of ratification doesn’t always require a formal signing ceremony. It can occur through explicit actions or, often, through a party’s conduct after becoming aware of the contract.

Express Ratification

This is when a party explicitly states their intention to accept the contract. It is the most direct and least ambiguous method.

Signing a formal ratification document.
Sending a written or verbal statement affirming the agreement (“It is all right”).
The company board passing a resolution to approve an officer’s prior unauthorized signing of a lease.

Implied Ratification

This occurs through actions or conduct that suggest acceptance, even without a formal statement. It is any conduct inconsistent with an intention of avoiding the contract.

Accepting the benefits of the contract (e.g., a company retaining and using equipment ordered by an unauthorized employee).
Continuing to perform duties or make payments outlined in the agreement after gaining full knowledge of the facts (e.g., a minor turning 18 and continuing to pay rent on a previously voidable lease).
Failing to reject the agreement within a reasonable time, especially if the transaction turns out to be profitable.

The Legal Implications of a Ratified Contract

Once a contract is properly ratified, the legal landscape changes significantly, often with a powerful retroactive effect.

Caution: Personal Liability in Unauthorized Commitments

In government or corporate settings, when an employee makes an unauthorized commitment, they may face personal and financial liability if the principal (the government/corporation) later refuses to ratify the act. Ratification is not mandatory, and the contractor acts at their own risk until the ratification process is complete.

Becomes Legally Binding and Enforceable: The contract is confirmed as fully valid, and both parties are legally bound by its terms. The non-breaching party can seek legal action for breach of contract if the other party fails in their obligations.
Waiver of Previous Defects: Ratification waives any prior right to void the contract based on the initial defect (e.g., duress, lack of capacity). By ratifying, the party agrees to overlook the issues that made it potentially invalid.
Retroactive Effect: Ratification generally relates back and is considered the equivalent of prior authority. In cases of agency, the ratification establishes the principal-agent relationship from the time the unauthorized act was performed, not from the date of ratification.
Protection from Legal Disputes: Ratification eliminates questions about the validity of the agreement, preventing future legal disputes regarding its enforceability.

Common Real-World Scenarios

Case Example: Agency Ratification

An Assistant Manager, lacking formal authority to enter into capital expenditure contracts, signs a maintenance agreement for a new office complex. The company’s President later learns of the agreement. Instead of immediately repudiating it, the President authorizes the first monthly payment and allows the maintenance work to begin. By accepting the benefit and performing under the contract, the company has implicitly ratified the Assistant Manager’s unauthorized act, making the contract fully binding on the company, even if the Assistant Manager initially lacked the proper signing authority.

Ratification is frequently seen across various sectors:

Real Estate Transactions: A purchase agreement is ‘ratified’ once the buyer and seller agree to all terms and conditions, often through signing and the removal of all contingencies (like financing or inspection).
Contracts with Minors: A contract signed by a person under the age of majority is voidable by the minor. However, once the individual reaches the age of majority, they can choose to ratify the contract by performing its obligations, such as continuing to make payments or use the contracted service.
International Treaties: When countries sign an international treaty, it is often not legally binding until it is formally ratified by the respective government’s legislative or parliamentary body.

Summary: 3 Steps to Contract Validity

For individuals and small business owners, understanding ratification simplifies the process of assessing contract validity:

Identify the Defect: Determine if the contract is voidable (e.g., lack of capacity, duress) or unauthorized (lack of agent authority).
Acquire Full Knowledge: Ensure all material facts and terms of the agreement are known before deciding on the course of action.
Act with Intent: To ratify, explicitly state approval or perform actions (e.g., accept benefits, make payments) that unambiguously demonstrate an intent to be bound by the agreement.

Final Conclusion on Ratification

Ratification is a crucial mechanism in contract law that allows parties to remedy initial flaws in an agreement. For a contract to be legally robust, the ratification process—whether express or implied—must be executed with full knowledge and clear intent. By ratifying, a party gains a fully enforceable contract but simultaneously waives the right to later claim the agreement was invalid. Always consult with a Legal Expert before acting on or ratifying an agreement with potential initial defects.

Frequently Asked Questions (FAQ)

Q1: Can I ratify only part of a contract?

No. Ratification must apply to the entire contract. You cannot accept the beneficial terms while rejecting the obligations. The act of ratification affirms the entire transaction.

Q2: What is the difference between a ‘ratified contract’ and an ‘executed contract’?

A ratified contract is one whose terms have been agreed upon and formally confirmed, making it legally binding, but it may still be in the process of fulfillment. An executed contract is one that has been fully performed, with all terms and obligations met by the parties.

Q3: How quickly must ratification occur?

Ratification must occur within a “reasonable time” after the principal gains full knowledge of the unauthorized act. If the principal maintains silence for too long and the transaction turns out to be profitable, that silence may be deemed implied ratification.

Q4: Can a principal withdraw ratification?

Generally, once a contract is ratified with full knowledge and clear intent, the ratification is final and cannot be withdrawn, as it relates back to the original date of the agreement. The party loses their right to void the contract.

Q5: Is a verbal ratification legally valid?

Yes, ratification can be express (word or deed) or implied (conduct). However, for contracts required to be in writing by law (like real estate), it is always best practice to have the ratification in a formal written document.

Disclaimer: AI-Generated Content Notice

This article was generated by an AI assistant based on publicly available legal information. The content provided is for informational purposes only and does not constitute legal advice. You must not rely on the information in this article as an alternative to legal advice from a licensed Legal Expert. Always consult a qualified professional for advice tailored to your specific situation and jurisdiction.

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May your agreements always be clear and your commitments fully validated.

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