ACCA Applied Skills · Corporate and Business Law (Global) · Agency law
Dana, without any authority, contracts with Corvin Ltd in the name of Pellam Ltd, a company that already existed. Pellam Ltd learns of the contract a week later, with full knowledge of the material facts, and confirms it. Which statement is correct?
Pellam Ltd may ratify the contract, and the ratification relates back to the date Dana made it. The company existed at the time, Dana purported to act for it, and it confirmed with knowledge of the facts. The third party's consent is not needed.
- APellam Ltd may ratify, and the ratification takes effect from the date of the contractCorrect
- BRatification is valid only if Corvin Ltd agrees to it
- CPellam Ltd cannot ratify because Dana had no authority at the time
- DRatification takes effect only from the date it was confirmed
Explanation
A principal may ratify an unauthorised act if it existed and had capacity when the act was done, the agent purported to act for it, and ratification occurs with knowledge of the facts. Ratification is retrospective to the date of the contract. Corvin's consent is not required, and lack of authority is exactly the situation ratification cures.
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