Question

Question 4

Mrs Lam works as a dealer selling sports equipment. Mary was employed as an accounting clerk by Mrs Lam at her Mongkok Branch. Without obtaining approval from Mrs Lam, Mary ordered dozens of badminton rackets on behalf of Mrs Lam at a special discounted price of $1,000 each from Champion Store. When the rackets were delivered, Mrs Lam was angry to know that it was ordered by Mary without her approval. On the same day, one of Mrs Lam’s customers, Shelly, ordered two dozen of badminton rackets from her. In response to Shelly’s order, Mrs Lam delivered the Champion badminton rackets purchased by Mary to Shelly. Yesterday an invoice from Champion Store on the rackets ordered was received by Mrs Lam. Required:

(a) Explain the concept of ratification of contract based on the law of agency. Discuss whether Mrs Lam is liable to pay for the invoice she received from Champion Store.

(b) Suppose Shelly had not placed an order with Mrs Lam and Mrs Lam had not resold the rackets, is Mrs Lam liable to pay for the rackets ordered by Mary?

Answer 1

The doctrine of ratification comes into play when a person has done an act on behalf of another without his knowledge or consent. The doctrine gives the person on whose behalf the act is done an option either to adopt the act by ratification or to disown it. So, it can be derived that ratifications are either empress or implied. The former are made in express and direct terms of assent; the latter are such as the law presumes from the acts of the principal; as, if Soham buy goods for Rahul, and the latter, knowing the fact, receive them and apply them to his own use. By ratifying a contract a man adopts the agency; altogether, as well what is detrimental as that which is for his benefit.

Conclusion

The conclusion that contractual validity agreement in subject to ratification clearly says that where acts are done by one person on the behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if they had been performed by his authority. Agreements which are subject to ratification are voidable in nature. If it is ratifies by the principal then it becomes legally valid in the court of law. If it is not ratified then the contract will lose its validity. Similarly if the principal has not consented and not given his consent to his agent to enter into agreement still he owes a duty towards third party because principal is bound by the acts done by an agent or the contracts made by him on behalf of the principal in the same manner, as if the acts had been done or the contracts had been entered into by the principal himself, in person. The principal is vicarious liable for the frauds or torts committed by the agent, while acting in the course of the business for the principal.

Yes,.Mrs Lam is liable to pay for the invoice she received from Champion Store.

b.Shelly had not placed an order with Mrs Lam and Mrs Lam had not resold the rackets, is Mrs Lam liable to pay for the rackets ordered by Mary - No, Mrs Lam has option to ratify the contract.

Effects of ratification
It is established that rule that an act done for another by a person not assuming to act for himself, but for such other person, though without any precedent authority whatever, becomes the act of the principal if subsequently ratified by him, within a reasonable time. In the case of a continuing obligation, such as the the engagement of a servant or the continuance of tenancy, an absence of repudiation or acceptance of service or rent with full knowledge of the facts, implied an undertaking to adhere to the obligation and operates as ratification or renewal of the old contract by the party accepting the service or rent.
So the ratification relates back to the original making of contract and confirms it from that time. It places all the parties in exactly the same position as they would have occupied in the case of a precedent agency by formal constitution. So ratification will support an action previously brought upon the contract in the name of the principal, though without his knowledge. The same is equally true of arbitration.