What does a ratified contract mean? Ratifying a contract is the act of approving the terms and conditions that are being spelled out in the document. After all, having a signed contract isn’t always enough. For example, if you go on vacation and provide permission to an employee to sign a contract on your behalf, you may be then asked to ratify it. This means that through your words or actions, you are accepting the terms of the contract.

Additionally, any situation in which you may be asked to ratify a contract provides you the opportunity to then refuse it.

How to Ratify a Contract

When ratifying a contract, there are a number of steps you will want to take. Among them are:

  • Read the entire contract, the terms and conditions, and ensure that you are clear on everything involved.
  • Be clear that in ratifying a contract, you will be ratifying it in it’s entirety; you cannot only ratify certain portions of a contract.
  • Make clear your declaration of acceptance of the contract. This can be done either via an express or implied declaration. An express declaration is a written and signed statement that you are accepting the terms of the contract, whereas an implied declaration is one in which your acceptance of the contract is provided via your actions.
  • Once you ratify the contract, you will be legally obligated to uphold your end of the agreement. As such, you will have to continue on with whatever is expected of you regarding the terms of the contract.
  • Be mindful that in ratifying a contract, it becomes retroactively effective from the date it was signed, not the date on which it was ratified.
  • If your business is registered as a corporation, be aware that you may be required to present the contract to your shareholders in order to ratify it.
  • Understand that the ratification of a contract is entirely voluntary, and you cannot be coerced into doing so.
  • Be aware that you do have the right to refuse ratifying a contract if you do not agree to the terms and conditions that are spelled out.

When Is it Used?

There are any number of business situations in which ratifying a contract may be expected or required, but one of the most common situations is in that of real estate. With that said, there are differing opinions as to when a contract is ratified in the real estate world. Some say that it occurs when all the parties involved have signed the contract documents, whereas others believe it is when all the contingencies have been removed from the contract agreement. Ultimately, it may really come down to the language that is being used in your real estate contract.

So, when it comes to real estate contracts, how is one formed? Let’s say you have put your house on the market and a potential buyer is interested in purchasing it; they will provide you with a written offer, generally done via your respective real estate agents or brokers. At this point, you will have three options as to what to do with said offer. You can:

  • Accept the written offer, as is.
  • Fully reject the offer.
  • Make the buyer what is known as a counteroffer.

While you may think of this as pertaining simply to the price that the potential buyer is offering, that is not the only case. For example, the closing date may also be “put on the table” and be the grounds for not accepting an offer or making a counteroffer.

Should a counteroffer be made, the process starts over, with the potential buyer having the same three aforementioned options. Some who have bought or sold homes can tell you that this back-and-forth process can continue on for quite some time with various offers and counteroffers being made until such time as the offer is either accepted or rejected. In the case of immediate acceptance of an offer, or upon acceptance of a counteroffer, some would say that the contract has then been ratified.

Others believe that the real estate contract is not ratified until such time as all of the contingencies have been removed. For example, the buyer may have contingencies regarding the buying of the home, after an inspection has been completed.

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