Agency: Understanding the Distinction Between Estoppel and Ratification

CEO Khai Intela
A contract of agency can be established in various ways. While express written agreements and implications are common methods, two other methods, estoppel and ratification, hold significant importance. Let's delve into these concepts to better...

Agency: The Difference Between Estoppel and Ratification

A contract of agency can be established in various ways. While express written agreements and implications are common methods, two other methods, estoppel and ratification, hold significant importance. Let's delve into these concepts to better understand their implications.

Estoppel: Confirming the Agency Relationship

Estoppel refers to a situation where a principal leads third parties to believe that someone is their agent and the third party conducts business with that agent. In such cases, the principal cannot deny the agency relationship, even if it didn't exist initially. Essentially, estoppel prevents the principal from contradicting the belief that the agent was acting on their behalf. This confirmation solidifies the contract of agency.

Ratification: Confirming the Third-Party Agreement

Ratification occurs when an individual with no authority assumes the role of an agent and later, the purported principal adopts the acts of that agent. This retrospective adoption establishes an agency relationship. However, ratification can only take place if the agency agreement was initially established. When the principal embraces the benefits of the contract, it signifies the ratification and confirmation of the agency contract.

To better comprehend these concepts, let's explore a practical example:

Estoppel: "Ron can sign the papers"

Imagine vintage car enthusiasts Bill and Ron. Bill, a doctor, seeks to invest in a valuable car. Ron, a mechanic, accompanies Bill to a vintage car auction. Bill decides not to bid on a 1960 Corvette, but Ron returns the next day when the vehicle remains available. Ron negotiates the price to $25,000 with the owner, knowing that Bill is interested. He contacts Bill, who directly speaks to the owner, acknowledging Ron as his agent. This confirmation from Bill solidifies the deal, and the legal agreement is drawn up between the owner and Bill, with Ron acting as Bill's agent.

Ratification: "I'll buy the Corvette"

In a similar scenario, Ron negotiates the price of the Corvette to $25,000 and the owner agrees. Ron contacts Bill, who ratifies the agreement between Ron and the owner. Once again, the legal agreement is drafted between the owner and Bill, with Ron acting as Bill's agent.

In both cases, the agent (Ron) is deemed to be the agent of the principal (Bill) from the beginning. The end result is the same, regardless of whether estoppel or ratification is applied. The agent's role is solidified, and the Court can decide which legal doctrine applies based on the circumstances.

Understanding the difference between estoppel and ratification is crucial in the legal realm. Whether you're a professional in the field or someone seeking to expand their knowledge, comprehending these concepts will empower you to navigate agency relationships effectively.

B.R. Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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