Ratification
The act of approving and adopting a contract or act that was made without authority, making it binding as if originally authorized.
While straightforward in theory, many businesses fail to actively track obligations tied to this concept - often resulting in missed deadlines, unintended renewals, penalties, or loss of contractual rights.
US Law · For business owners and foundersWhat is a Ratification?
Ratification is the approval by a principal of a prior act done by an agent (or purported agent) without authority, or done outside the scope of the agent's actual authority. Once ratified, the act is treated as if it had been authorized from the beginning - the contract or obligation becomes fully binding on the principal retroactively.
Ratification can be express (a formal written or verbal statement of approval) or implied (through conduct inconsistent with rejection, such as retaining the benefits of the contract, making payments under it, or allowing performance to proceed without objection). Silence alone is generally not ratification, but accepting ongoing benefits while knowing of the unauthorized act can be.
In corporate governance, ratification is frequently used when officers sign contracts beyond their delegated authority, or when a board of directors approves an agreement after the fact. Ratification is also used to cure defects in contract formation - for example, a company can ratify a contract signed by an employee who lacked signing authority, making it binding on the company.
In practice, many teams rely on a contract expiry tracking system to stay on top of dates and obligations tied to clauses like this.
Key Elements
Knowledge of Material Facts
The principal must know all the material facts about the unauthorized act before ratification is effective. Ratification based on incomplete information may be voidable.Full Ratification Required
The principal must ratify the entire act - not just the favorable parts. A principal cannot ratify the benefits of a contract while rejecting its burdens.Timely Ratification
Ratification must occur before the third party withdraws from the transaction. A counterparty can set a deadline for ratification.Capacity
The principal must have had capacity to authorize the act at the time it was done, not just at the time of ratification.Real-World Example
A sales manager signs a 3-year exclusive supply contract with a vendor without board approval. The company's CEO discovers the contract but says nothing and the company accepts three shipments under it. Six months later the company tries to void the contract, claiming the manager lacked authority.
By accepting deliveries and making payments without objection for six months, the company has ratified the contract by conduct. It cannot now void it on grounds of the manager's lack of authority. The company's behavior was inconsistent with rejecting the contract and constitutes implied ratification.
This is why many businesses adopt automated deadline tracking to ensure no critical dates are missed before they pass.
Sample Clause Language
Board Ratification ClauseWatch Out For
Accepting benefits may inadvertently ratify a contract
If your employee signs an unauthorized contract and you receive and use the goods or services without objecting, you may be deemed to have ratified it - even if you never expressly approved it.Ratification is retroactive - it can create unexpected liability
When a principal ratifies an unauthorized contract, the ratification takes effect from the original contract date, not the ratification date. This can create liability for events that occurred before the ratification.Don't let ratification deadlines catch you off guard
Key dates tied to ratifications - renewal windows, expiry cutoffs, notice periods - can easily slip through the cracks when tracked manually. Missing them triggers automatic extensions, penalties, or lost rights. ExpiryEdge tracks every critical deadline and sends automated reminders before they're due - so nothing slips.
Instead of relying on spreadsheets or manual follow-ups, a centralized renewal reminder system ensures every deadline is visible, tracked, and actioned automatically.
How to Use This in Your Favor
Establish clear signing authority policies
Prevent unauthorized contracts by implementing contract signing policies - specifying who may bind the company at what dollar thresholds. This reduces the frequency of situations requiring ratification.Ratify promptly to maintain counterparty trust
If an employee has signed beyond their authority and you want to honor the contract, ratify formally and promptly by board resolution. This gives the counterparty certainty and avoids disputes.Related Terms
Frequently Asked Questions
Can a minor ratify a contract after turning 18?
Yes. A contract entered into by a minor is voidable - the minor can disaffirm it or ratify it upon reaching the age of majority. Ratification after turning 18 makes the contract fully binding.
Is ratification different from novation?
Yes. Ratification approves an existing (previously unauthorized) contract. Novation substitutes a new contract or new party for an existing one, discharging the original obligation entirely.