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ACCA Applied Skills · Corporate and Business Law (Global) · Agency law

Lena, without any instructions from Marlow Co, signs a contract in Marlow Co's name to buy materials, claiming to be its agent. Marlow Co later learns of the contract and, with full knowledge of the material facts, accepts the materials and states that it adopts the deal. Which statement is correct?

Marlow Co may ratify, and the contract binds it from the date Lena made it. Ratification is retrospective, so the earlier lack of authority does not matter provided the principal existed and adopts the contract with full knowledge of the material facts.

  1. AMarlow Co may ratify, and the contract binds it from the date Lena made itCorrect
  2. BMarlow Co cannot ratify because Lena had no prior authority
  3. CRatification operates only from the date Marlow Co adopted it
  4. DLena alone is bound because she lacked authority

Explanation

Ratification is retrospective: a principal who existed and was identifiable at the time may adopt an unauthorised act, and it is treated as authorised from the outset. Prior authority is not required, so the second option is wrong. Lena is released from liability once the ratification is valid.

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