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RATIFICATION OF THE UNAUTHORIZED ACTS OF AN AGENT AS A GROUND

OF A PRINCIPAL'S LIABILITY, BOTH IN CONTRACT AND TORT.

By Frederic R. Kellogg.

(Awarded Second Prize in Municipal Law, 1888.)

It is a well-settled principle of the common law that no man is bound by an act done by another unless he has expressly or impliedly authorized its commission or was under an imperative duty to prevent it. There are, however, two modes in which liability for the consequences of such an act may be imposed upon him. The first is by such conduct as estops him from denying an original authority; the second is by a voluntary ratification of the act. These two methods, although frequently confounded, must be kept distinct, (1) each containing certain elements not necessarily present in the other; and it is the second of them that we are here to consider.

The ratification of an unauthorized act is its voluntary adoption by the one for whom it was done (2). It does not operate, as sometimes supposed, as presumptive evidence of an original authority, but is a conclusive adoption of an act admittedly originally unauthorized. (3) To establish such adoption, there must be evidence of an intention on the part of the one ratifying to supply the want of an original authority to bind him by the act, and to receive the benefits and assume the liabilities which may accrue under it. it. To promote justice, the law will carry this intention, as manifested by his acts, into effect, provided that the other parties interested be not thereby prejudiced.

(1.) I Am. Lead. Cas, 719; Bigelow, Estoppel, 580.
(2.) 33 N. Y., 653; 72 N Y., 385; 46 Maine, 196.
(3) 15 N. Y., 577; 50 N. H., 132.

In order to accomplish this result, and to obviate the objection that the act ratified is, as to the person ratifying, entirely a thing of the past, which no adoption can revive, the doctrine of relation is invoked, and the ratification, which otherwise would be of no avail, is deemed to retroact and supply the lack of original authority. This doctrine, being a mere fiction, will never be employed when so to do would accomplish injustice, (1) or would give rise to results inconsistent with the facts of the particular case. (2) A fiction will never be used to accomplish a legal impossibility. But, subject to these limitations, it is evident that its effect is not to produce injustice, but to work justice; since the agent and any third parties concerned are, by its application, placed in the position in which they desire to be, while the party ratifying has the advantage of knowing that everything has been done to his complete satisfaction. (3) •

A distinction must here be drawn between a ratification, as above defined, to which the doctrine of relation will apply, and cases which may arise seemingly analogous, but really amounting to the creation of a new engagement; as where A, professing to act for B, but without authority, receives an offer from C for the sale of goods. Here there is, as yet nothing to ratify; and a simple adoption by B of what A had done would lead to no

(1.) Langdell, Sum. Cont, § 8; 18 Wall., at p. 336. (2.) Pollock, Contracts, p. 108 (note).

(3) Bird vs. Brown, 4 Exch., 786.

result. But when B notifies C that he accepts the offer, a contract arises, which, as to all its effects, dates, not from the time of the offer, but from that of the acceptance; while if A, acting as before, had actually bought the goods in B's name, B's subsequent adoption would relate back to the time of the original transaction. (1) The same is true in the case of a tort; an instance of which would arise if A, without authority, should wrongfully seize C's goods in B's name, and B, with knowledge, should receive the property into his possession. The latter would be liable, not only as having ratified the original act, but for an independent conversion.

With a brief glance at the general theory of ratification, we may now take up the various points in detail. We shall con

sider

I. The original act.

II. The ratification.

III. The effect on the liability of the principal.

I. The Original Act. This may be either a contract, a tort, or a bare act neither contract nor tort. Subject to certain qualifications, it may be laid down as a general rule that any of these may be so ratified by the one for whom they were done as to become binding upon him. (2) The main exceptions to this principle are the following:

A. The act must not be so opposed to law or public policy that no action can be brought upon it; as, for instance, a contract made void by statute. In such a case the ratification could not remove the taint, and no rights or duties would arise under it. (3) The act must be legal, not only at the time of its commission, but also at the time of its ratification. (4)

(1.) See Mactier vs. Frith, 6 Wend., 103, also 24 Wend., 97; (2.) 6 Mann & Gr., 242; 1 Bro & B., 282; L. R. 7 C. P., 43(3.) Story, Agency, § 241; Pomeroy, Eq Jur., § 964 (note). (4) 18 Wall, p. 336.

B. Certain classes of acts, upon which the action of some third person must depend, must be done by virtue of an original authority, and do not admit of subsequent ratification. (1) As these questions concern the liability of such third persons to the principal, we cannot consider them here.

C. It has been laid down that if the act amount to a crime, no ratification is possible which will render the principal liable. (2) The most common instance arises when one forges another's name to a contract. The courts of England and several of the American States deny the possibility of a valid ratification of such signature, unless, perhaps, an estoppel be worked; (3) while other American authorities support the opposite view. (4)

There are two main objections upon which the opposition to such a ratification is founded. The first is that the act ratified is illegal, and hence a ratification of it can be of no effect But this seems to confound the contract which is signed with the crime committed in making the signature. It is the former of these, the civil act, which is ratified, and not the latter, which is an offence against the State; and unless the contract itself be illegal, it is hard to perceive why this objection should avail, since no ratification of such a contract can make the forgery of the signature any the less a crime. (5)

The second objection is that the forger does not assume to act as agent for or on behalf of the person whose name he signs, but personates him, and that no act can be ratified, unless done by one as agent for the ratifier. This objection is largely founded on the form of the signature, no

(1.) 1 Am. Lead. Cas., 718; 5 East, 491.

(2.) L. R., 6 Exch, 89; 92 Pa. St., 449.

(3 L R., 6 Exch, 89: 33 Oh St., 405: 92 Pa. St., 449. (4.) 4 Allen, 447; 3 Lans., 174; 7 Hump., 224; 33 Conn., 95.

62 II, 483; see 46 Me, 176.

(5.( Bishop, Crim Law, $ 579.

indication of agency there appearing. But there is little doubt that an unauthorized signature in the same form would admit of ratification if the person signing had no intent to commit a crime; (1) and as we have seen that the crime committed in signing is distinct from the contract signed, it would seem that this objection should fail. The rule, that the person doing the act must act as agent for the one who ratifies, means that he must not intend to bind himself alone, or some third person; and in the present instance he clearly assumes to bind the one who ratifies, and no one else. It certainly seems that if the English rule on this point should prevail, it must be, not upon any consideration of justice or public policy, but upon technical distinctions of the most evasive description.

D. In order to admit of ratification, the act, of whatever kind, must have been done, not on account of the actor, or some third person, but as agent for and on behalf of the person who ratifies. (2) The reason of this is that unless the act be done on account of the one ratifying, the whole transaction would be, as to this latter, res inter alios acta, to which he could not become a party by any attempted ratification, but only by an independent assignment. If the act be a tort, there would be the additional reason that an adoption of it by a stranger who had the right to do it would discharge the tort-feasor from the consequences of his wrong, and thus destroy a vested right of action in the one against whom the tort was committed. (3) It follows from this that a more unequivocal manifestation of an intent to act as agent would perhaps be required in such cases than in contracts; for, in the latter (1.) 4 Allen, 447; 11 Cush.. 598: 41 Maine, 382; 4 Lans., 40; Chitty on Bills. 37; 121 Mass., 159.

(2.) 6 Mann & Gr., 242; 11 C. B. N. S. at p. 770); 11 C. B., 191; 12 C. B., 719; 1 N. Y., 433; 6 Exch.. 327.

instance, a subsequent ratification, although it might charge an undisclosed principal, would not discharge the agent.

To discover on whose behalf the act was done, we must look to the intention of the person by whom it was done. (1) It is not essential that the agent should know the name of the one for whom he intends to act; (2) but this latter must, at the time be so within the agent's contemplation as to be capable of future designation. (3) Only such persons can ratify the act, even though at the time words be used of sufficient scope to include the one ratifying. (4) What the actor's intention was is a question to be determined by the court or the jury from all the evidence (5) Important circumstances to be considered are the actor's declarations; what person could alone be benefitted by the act; (6) the relations between the actor and the person ratifying; (7) any facts rendering it improbable that the ratifier was in the agent's contemplation at the time. (8)

But, whatever the actor's real intention may have been, it cannot be set up to contradict a different intention clearly manifested at the time. If the actor professes to contract for himself or for A, B cannot become a party by any ratification. In this connection, a question may be raised concerning an act done by one intending to represent another, but not disclosing such intention in any way to the other party. Does the actor by such silence so profess to act solely for himself as to prevent any third person from coming in by ratification? This might be so

held as to those contracts where it is important for the other party to know with

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(3.) 2 Leon, 196; 2 Leon, 215.

(8.) 11 C. B. N. S., 756.

such ratification is without effect, (1) since the corporation could not have done the act when it was done, and the fiction of relation will not be so applied as to controvert the facts. The rule is different as to ratification by administrators of acts done prior to their appointment. (2)

whom he is contracting, as, perhaps, fire same. The weight of authority is that and marine insurance; and as to torts, where a ratification might defeat an action against the tort-feasor; but as to ordinary torts and contracts, where no existing rights could be impaired, it is not perceived why the rule of undisclosed principal (1) should not apply, as well as where a precedent authority has been given, since a ratification is equal to an original command. There would be more difficulty in proving the agent's intent in such a case, but that being satisfactorily accomplished no reason is apparent why the same principle should not prevail.

E. The act may be done by any person, it not being necessary that any previous agency should exist. (2) But if the actor was legally incompetent to act as agent, no subsequent ratification of the act can affect this objection to its validity. Hence, where a sheriff, prohibited by law from purchasing as agent at his own sale, did so without authority in the name of one who ratified, the ratification was held to be without effect. (3)

II. The ratification. Under this topic we shall consider: A. The persons who may validly ratify an act; B. The time when the ratification must be made; C. The necessary elements of a binding ratification.

3. If the person ratifying never had power to grant an original authority to do the act, it follows logically that no subsequent ratification can make it binding. This rule becomes of great importance, when applied to corporate ratification of contracts ultra vires. Only a few points can here be noticed.

a. By ultra vires is meant simply that the act is in excess of the powers of the corporation, and not that it is opposed to law, or public policy, or expressly prohibited in the company's charter. (3) These latter acts fall under the general prohibition of illegality before alluded to. (4)

b. If the contract ratified be purely executory, the rule will in general be rigidly applied. (5) If it be executed by one of the parties, the nature of the corporation will be considered. If, in the first place, it be a purely private association, and the act is ratified by all the stock-holders or persons interested, the ratification will

A. The main principles under this divi- generally be held valid; since the prohision are the following:

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bition, against acts which are ultra vires, rests on public policy, and this doctrine would not be applied where it would work greater harm than it would prevent. (6) But if, on the other hand the corporation be of such a nature that the ratification of all interested cannot possibly be obtained, (as a charitable or especially a municipal

(1.) L. R., 2 C. P., 174; L. R., 9 C. P., 505; L. R., 16 Ch. D, 125: 3 Daly, 98.

(2.) 12 M. & W, 232.

(3 22 N Y., 258.

(4.) Ante, p. 11. L. R., 7 H. L., 653; 73 N. Y., go.

(5) 63 N Y., 68,

(6.) 78 N. Y., 185; 90 N. Y., 607.

corporation,) no ratification by the directors or common council will be valid. (1) This rule is strictly applied in the last mentioned instance, since the interests of the community demand imperatively that the powers granted to the council,—which is but a governmental agent-shall not be exceeded. But even in this case, if the variation be unimportant, as a mere informality in the execution of a power granted, and injustice would otherwise result, the ratification will be given effect. (2)

4. Subject to these rules, any person, natural or artificial, may make a valid ratification. (3) And this applies to a State as well as to a private person. (4)

B1. Although a ratification is deemed to date back to the time of the original transaction, yet it is the first act by which the principal becomes connected with such transaction; and, since it is equal in effect to an original grant of authority to do the act, it follows that if it be not made while the one ratifying has power to grant such authority, it is of no force. (5) Thus if the principal had been judicially declared insane, or at common law had become a feme covert before the ratification, it would accomplish nothing, either in conferring rights or imposing liabilities. The majority of cases on this point have arisen where the principal sought to gain advantage from a ratification made after he had lost capacity to legally do the act, and such ratification was held too late. An exception to this has been established in contracts of marine (6) and fire insurance; (7) but the general rule prevails as to life insurance. (8)

(1.) 10 Wall, 684: 16 How. Pr., 446, affd. 20 N. Y., 312; 16 Cal., p. 626; 20 Cal., 102.

(2) 73 N Y., 238

(3.) 19 N Y,

(4

207.

2 Exch., 188; 26 Wend., 226.

(5.) 16 Cal., p. 623.

(6) 2 M. & S., 485; 1 C. P. D., 764; 5 Metc., 192.

(7.) 7 Lans., 143.

(8.) 129 Mass., 240.

2. Until a ratification has been made, the only persons interested in the original transaction are the agent and any third persons involved; and these persons may, if they choose, undo anything that they have done. In such a case, no subsequent ratification by the principal will be of any effect. (1) And, likewise, it would seem, since the ratification of a contract is not a new contract, but an adoption of one already existing, and since any action must be brought upon such existing contract, that a ratification, made after the Statute of Limitations had run from the date of the original contract, would accomplish nothing. (2)

C. To constitute a valid ratification where no estoppel arises, there must be on the part of the one ratifying: (1) full knowledge of all material circumstances concerning the act to be ratified, and (2) evidence of his intention to adopt such

act.

1. The person for whom the act was done is under no obligation to ratify it, but has an absolute right to elect whether he will do so or not; (3) and there can be no intelligent election without full knowledge of the matters involved, (4) unless there be an intent to adopt the act, whatever it may be. (5) So essential is this knowledge, that if a ratification has been made in ignorance of any material facts, the principal may disavow it, unless an estoppel has been worked (6) on placing the other parties in statu quo. (7)

The points to be considered are:

a. Notice is not equivalent to knowledge. A man may be chargeable with implied or constructive notice of facts of which he has no actual knowledge, the principle be

(1) L. R., 6 Exch., 125; 19 N. Y,, 405.

(2 See 50 N H., 132.

(3. L. R., 7 C. P., 43; 92 N. Y., 597.

9 Pet., 607: 93 N. Y., 495

(5.) 13 Q. B., 780, 52 N. Y, 277

(6 6 Pick, 198; 35 Md., 69.

(7.) 19 Pick., 300.

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