MBE Rules · Business Associations
Ratification
Ratification (agency)
The rule
A principal ratifies an unauthorized act by accepting its benefits or affirming it with knowledge of material facts; ratification relates back, must cover the entire transaction, and cannot cut off intervening third-party rights.
In plain English
Ratification occurs when a principal approves an unauthorized act performed by an agent, either by accepting the benefits of the act or affirming it after learning all relevant facts. This approval applies retroactively to the entire transaction but cannot infringe on the rights of third parties who may have intervened in the meantime.
Worked example
An agent signs a contract on behalf of a principal without authorization. Later, the principal learns about the contract and begins receiving benefits from it, such as payments. By accepting these benefits, the principal ratifies the contract, making it valid as if the agent had the authority to sign it from the start.
Memory hook
Ratification: approve it, and it’s as good as done!
The trap
Exams may present scenarios where a principal seems to accept benefits but does not fully affirm the act, leading students to mistakenly believe ratification has occurred. Watch for nuances in the principal's knowledge and acceptance.
How examiners test it
Questions often involve a scenario where an agent acts without authority, followed by the principal's response, testing whether ratification has effectively occurred and if third-party rights are affected.
Drill this rule until it can't fail you.
Vrenberg generates unlimited questions on this exact rule, tracks your mastery of it, and brings it back until it sticks.