Important conditions that should be fulfilled for a valid ratification are:
1. The agent must purport to act as agent for a principal who is in contemplation:
The agent must expressly contract as an agent for a principal in the knowledge of third parties. The principal must be named or must be ‘identifiable’ and it is not sufficient to indicate simply that he is acting as agent of some one.
ADVERTISEMENTS:
The word ‘identifiable’ here means that there must be such a description of the principal as shall amount to a reasonable designation of him, for example, it would cover the expressions like “on behalf of the Vice- Chancellor, Delhi University” or “on behalf of my elder brother.” Thus, to be valid, ratification must be done by the person on whose behalf the agent professed to act.
An undisclosed principal cannot step in and ratify acts done by a third person. Similarly, a person entering into a contract in his own name cannot later shift it on to a third party.
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2. There should be an act capable of ratification:
ADVERTISEMENTS:
The act to be ratified must be a lawful one. There can be no ratification of an illegal act or an act which is void. Thus, the shareholders of a company cannot ratify an ultra vires contract made by the directors.
3. The principal must be in existence:
For a valid ratification it is essential that the principal must be in existence at the time when the original contract is made, because rights and obligations cannot attach to a non-existent person. Thus contracts, entered into by promoters of a company on its behalf before its incorporation, cannot be ratified by the company after it comes into existence.
4. The principal must be competent to contract:
ADVERTISEMENTS:
The principal must have contractual capacity both at the time of original contract and at the time of ratification. Thus a person cannot ratify a contract made on his behalf during his minority.
5. The principal must have full knowledge of material facts:
Section 198 declares: “No valid ratification can be made by a person whose knowledge of facts of the case is materially defective.” Thus to constitute a valid ratification, the principal must, at the time of ratification, have full knowledge of all material facts or give such an unqualified acceptance that the inference may be drawn that he intended to ratify the contract whatever the facts may be.
6. Whole transaction must be ratified:
Ratification must be of the whole contract. Once a part is accepted, it is an implied acceptance of the whole (Sec. 199). There cannot be partial rejection and partial ratification. The principal cannot reject the burdens attached and accept only the benefits.
7. Within reasonable time:
A ratification to be effective must be made within a reasonable time after the original contract is made. Where a time is expressly fixed for the performance of the contract, ratification must be made within that time.
8. Ratification must not injure a third person (Sec. 200):
Ratification cannot be effective where its effect is to subject a third person to damages, or terminate any right or interest of a third person.
Illustrations (Appended To Sec. 200). (A):
A, not being authorised thereto by B, demands on behalf of B, the delivery of a chattel, the property of B, from C, who is in possession of it. This demand cannot be ratified by B, so as to make C liable for damages for his refusal to deliver.
(b)A holds a lease from B, terminable on three months’ notice. C, an unauthorised person, gives notice of termination to A. The notice cannot be ratified by B, so as to be binding on A.