Agency by ratification - Assignment Example

Agency is the association that exist when one party known as agent decide to represents another party known as principal in a business transaction and has power to alter the legal situation of the party they represent in an agreement with a third party Agency by ratification comes into existence if one party acted as an agent for a non existing principal, and the party claimed to be the principal actually accept to be bound by the term of the agreement as if they had actually authorized the agent to act on their behalf (Stone, 2011).

Under such circumstance, the alleged principal can never disown the agreement and they indeed become the principal and agent in all legal perspectives. The agencies by ratification become legal only if the alleged principal met legal requirements of a principal at the time of acceptance of the contract (Gordley, 2001). However, under such a situation, both the principal and the other party have the right to sue the agent for the loss suffered as a result of the conducts of the agent. In order for this agreement to become effective, the alleged principal must have been in a potential to form such a relationship.

For the contract to be ratified, the agent must disclose to the other party that they are actually acting as agent for the certain principal though not disclosed to that other party (Stone, 2011). Therefore, if the agent fails to state that they are acting as agent, this agreement cannot be effective. For example, in Keighley Maxted & C v Durant [1901], Keighley authorised the other business partner R to purchase weight at a specified price for their business. However, R could did not get weight at the specified price and instead decided to purchase it from Durant at a greater price.

Keighley promised to accept the agreement, but later declined it. Durant challenged the decision in the court, but the House of Lords issued a verdict Keighley was no bound by the agreement due to the reason of it imposed unnecessary cost. The regulation requires that at the time of creation of agreement, the alleged principal who will approve the agreement must be in surviving at the time the accord was being made (Gordley, 2001). This requirement aims to protect third party from entering into unlawful treaty.

This is because the law has set definite terms which a person should meet before they can sign abiding agreement. Therefore, if a person alleged to be the principal could not be determined at the time of signing the agreement, then the person cannot be able to approve and adopt the contract later. For example, in Kelner v Baxter (1866) LR 2 CP 174, advertisers of a nonexistent company entered into an agreement with buyers before the company was established. After the formation of the company, those buyers purchased the wine on credit, which they never paid until the company went on liquidation.

The promoters were sued, but they argued that they had acted on behalf of the company hence were not responsible (Stone, 2011). However, CJ Erle claimed that the marketer were liable for the debt since the company was nonexistence at the time they signed the agreement with the buyers. The alleged principal must have contractual capacity to form a binding agreement at the time the treaty was being made (Gordley, 2001). For example, the person must be of sound mind at the time the contract was signed on their behalf.

In Dibbins v Dibbins (1896), the solicitor applied to the court with intention of acquiring partnership property since the only surviving partner was insane (Stone, 2011). The solicitor notified the court about the state of the agent and intention o effect the agreement on their behalf. However, the notice was beyond the agreed time