Industrial Molded Plastic Products, Inc. v. J. Gross and Sons, Inc.
also illustrates
the idea.
Finally, even if I sign a contract with no authority at all, you can still be bound by it if you
ratify or affirm the deal. Express ratification occurs if you deliberately decide to be bound
by the agreement and give notice of that intention. Implied ratification exists when your
words or conduct seem to indicate that you intend to be bound by the deal. There are a few
specific requirements for ratification:
A)
Principal can only ratify if the agent, in dealing with the third party, had
indicated that he or she is acting for a principal and not on his/her own behalf.
B)
At the time of ratification the principal must have known or had a reason
to know the essential facts about the transaction.
C)
Ratification must occur within a reasonable time after the principal
learned of the transaction.
D)
If the principal ratifies, he or she must ratify the entire transaction rather
than ratifying that part that is to his or her advantage and repudiating that
which is to her or her disadvantage
E)
The transaction must be legal, and the principal must have the capacity
required to be a party to the transaction
F)
If any formalities (such as a writing) would have been required for original
authorization, the same formalities must be met in ratifying the transaction.
3)
Agent and Third Party Contractual Liability
Usually, when agents sign agreements on behalf of principals, the agents are not personally
responsible for honoring the agreements. If an agent violates any of the duties owed to the
principal, he or she naturally is liable for the damages caused by the breach.
The agent
who exceeds his/her actual authority is personally responsible unless the principal ratifies
the unauthorized actions. If the agent personally assumes liability or a particular
transaction then he or she is obviously responsible. If the agent, in dealing with a third
party, fails to disclose that he or she is acting for a principal or fails to disclose the
principal’s identity, the agent is personally responsible to the third party.
However, the following exceptions exist:
●
When agents sign an agreement without
any
type of authority, they can be liable to a
third party.
●
When agents act with only apparent authority, their liability is to the principal.
●
Agents can choose to assume liability for an agreement.
●
Agents are usually personally liable:
○
if they make a contract and fail to notify the third party that they are acting
on behalf of an agent at all.
○
if they do not disclose the principal's identity.
○
if they claim to be acting on behalf of a principal that does not exist.
Liability of the Third Party:
A)
If the third party fails to live up to his or her part of the bargain, that person will be
liable to the principal.
