Ratify a Contract: Everything You Need to Know
To ratify a contract simply means that one or more parties wants to move forward with a contract even if clauses in the contract state you do not have to do so.3 min read
To ratify a contract simply means that one or more parties wants to move forward with a contract even if the clauses in the contract state you do not have to do so. If you want to enforce a contract made with a person who did not have the right to get into a contract but did so on behalf of the business, knowing how to ratify a contract is crucial for any business owner.
Legal Issue of Ratification of a Contract
A contract ratification is needed if a contract is voidable but all parties determine that they would like to execute and do the contract anyway. As a business owner, you may have to ratify contracts signed by those who did not provide a signature.
A contract includes an offer, acceptance, consideration, and a meeting of the minds. This means that you make sure everyone understands and agrees to the contract terms.
Consideration refers to the act of the parties exchanging something of value during contract creation. If there are issues in the creation in the terms, the contract could be voided. A written contract signed by those who are authorized to bind the corporation is an example of ratification.
A contract describes the obligations and rights in the arrangement and lets a party get legal help if the contract is reached. In some cases, the agreement can be changed. The parties can then amend their agreement to show the change.
Contracts that were voided may not be ratified because they cannot be executed legally. This can include contracts that were made involving anything illegal, those for performance of events that are impossible, and those who restrain someone’s choice of who to marry.
Contracts that are voidable otherwise, but not void, could be performed through ratification. This can include contracts where a party is incapacitated when the contract was signed due to alcohol use.
When a person communicates with another person, either in words or by actions, the person accepts and approves of the conduct. Ratifications are either express or implied.
Express are made in the express and direct terms of assent. Implied are those that presume from the actions of the principal. The principal is allowed to choose if he will nor will not adopt any unauthorized acts. Once the act is ratified, it cannot be revoked if everyone is clear on the circumstances.
The ratification can be retrospective and binds the principal. It has to be voluntary, and the party has to know that he or she would not be bound without it.
A ratification agreement has to state that every party wants to ratify the contract. A copy of the contract has to be attached. It needs to include the date of the ratification and any clauses necessary. This includes how the notice will be provided in the agreement. The agreement has to be signed by all parties.
Vicarious liability happens when the ratification is not necessarily needed to hold the business liable for some conduct. Businesses are responsible for their employees’ actions unless the action is done outside his or her employment.
Business Decisions of the Board
In some cases, there needs to be more than one person to ratify a contract. A corporation uses a board of directors, each of whom are chosen by shareholders. For an action to be valid, the bulk of the board has to vote to approve the action. If the board does not authorize an action, it can avoid liability.
How to Ratify a Contract
If an employee signs a contract for your business, the other party could want you to ratify it by showing you accept the terms. If you have the grounds to void the contract, ratifying demonstrates that you want it to continue anyway as is. You do have the option to refuse ratification.
The following are items to consider when entering into an agreement:
- Look over the agreement and make sure you understand the terms and conditions. If you ratify one part of the contract, you have to ratify the entire agreement.
- Make an express or implied declaration that you accept the terms.
- Continue honoring the terms of the contract as normal.
If you need help with ratifying a contract, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.