Ratification by Principal. Fred Hash worked for Van Stavern Construction Co as a field supervisor in charge of constructing a new plant facility. Hash entered into a contract with Sutton's Steel & Supply, Inc, to provide steel to the construction site

Question

in several installments. Hash gave the name of B. D. Van Stavern, the president and owner of the construction firm, instead of the firm name as the party for whom he was acting. The contract and the subsequent invoices all had B. D. Van Stavern's name on them. Several loads were delivered by Sutton. All of the invoices were signed by Van Stavern employees, and corporate checks were made out to Sutton. When Sutton Steel later sued Van Stavern personally for unpaid debts totaling $40,437, it claimed that Van Stavern had ratified the acts of his employee, Hash, by allowing payment on previous invoices. Although Van Stavern had had no knowledge of the unauthorized arrangement, had he legally ratified the agreement by his silence? Explain.

Answer 1

Ratification by principal
One of the requirements for ratification is that the principal must know of all material facts involved in the transaction. Van Stavern did not have knowledge of Hash's conduct. Van Stavern did not know that the steel was being delivered in his name and that he was being personally billed for the shipments. Unlike liability by apparent authority, ratification is an affirmative act by the principal by which he or she accepts the unauthorized conduct of the agent. Only a principal can ratify; therefore, the invoices and checks signed by Van Stavern's employees did not impute knowledge to Van Stavern personally. The court noted that the use of corporate checks constituted additional proof that Van Stavern considered the expenses to be corporate, not personal. Therefore, Van Stavern could not personally be held liable. Note that this is not unduly harsh on Sutton Steel. Sutton knew it was dealing with a construction firm and did not try to get Van Stavern's personal affirmation of the arrangement. Legally, in this situation Sutton's agreement is considered an unaccepted offer that can be revoked at any time.