If a person falsely represents that he is an agent of another, the principal may ratify the act even though the same was done without his authority. Discuss, in the light of the above statement, the essentials of valid ratification and its effect.

Understanding Agency and Ratification

Agency, as defined under Section 182 of the Indian Contract Act, 1872, occurs when one person (the agent) is authorized to act on behalf of another (the principal). This authorization can be express or implied. However, situations arise where a person acts as if they are an agent without actual authority. In such cases, the principal has the option to ratify the act, thereby validating it as if it were originally authorized.

Essentials of Valid Ratification

For a principal to validly ratify an act done by a person as their agent without authority, several conditions must be met, as outlined in Sections 190-194 of the Indian Contract Act, 1872:

• Capable Principal: The principal must be competent to contract at the time of both the act and the ratification. This means they must be of sound mind and not disqualified from contracting by law (Section 190).
• Act Ratifiable: The act ratified must be one which the principal could have lawfully done themselves. For example, a principal cannot ratify a contract that is illegal or void.
• Knowledge of Facts: The principal must have full knowledge of all material facts relating to the act at the time of ratification (Section 191). This includes knowing the nature of the act, the identity of the third party, and the terms of the agreement.
• Ratification must be Express or Implied: Ratification can be expressed through a clear statement of approval or implied through conduct demonstrating an intention to adopt the act. For example, accepting benefits under a contract made by an unauthorized agent can be considered implied ratification.
• Ratification within Reasonable Time: Ratification should be done within a reasonable time after the act is done. What constitutes a reasonable time depends on the circumstances of each case.
• Third Party Rights: Ratification cannot prejudice the rights of any third party who has already acquired rights under the transaction (Section 194).

Effects of Ratification

Ratification has several significant legal effects:

• Validation of Act: The act, once ratified, becomes legally binding on the principal as if it had been originally authorized.
• Agent’s Liability: The agent is released from liability to the third party for any loss caused by the lack of authority, provided the agent acted in good faith (Section 195). However, if the agent intentionally misled the third party about their authority, they remain liable.
• Principal’s Liability: The principal becomes fully liable to the third party for the act, just as if it had been authorized from the beginning.
• Rights Acquired: The principal acquires all the rights and benefits that would have accrued had the act been originally authorized.

Distinction between Ratification and Adoption

It’s important to distinguish ratification from adoption. Ratification occurs when a principal approves an act done by someone *claiming* to be their agent. Adoption, on the other hand, occurs when a principal voluntarily accepts the benefit of a completed act done by a stranger, without any prior claim of agency. Adoption creates a new contract, while ratification validates an existing one.

Feature	Ratification	Adoption
Claim of Agency	Agent claims to act on behalf of principal	No claim of agency; act done by a stranger
Effect	Validates existing act	Creates a new contract
Liability of Agent	Agent released from liability (if acted in good faith)	Agent remains liable

Illustrative Example

Suppose Arun pretends to be the agent of Bharat and sells Bharat’s goods to Charan. If Bharat subsequently approves the sale and pays Charan, Bharat has ratified Arun’s unauthorized act. Bharat is now bound by the sale, and Arun is released from liability to Charan, assuming Arun acted honestly.