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I was wondering what the ratification of a contract means. For example, “Legally, Pre-incorporation contracts cannot be ratified by the company”. I understand the statement but I do not exactly understand what the word ratify means.
I believe that the context in which you have read this element is the area of Agency Law
In company law, certainly, it’s not possible for a company post-incorporation to ratify a promoter’s pre-incorporation contracts made ‘on behalf of’ the the as-yet-unborn company
That bit about ‘as-yet-unborn’ is crucial. You cannot act as an agent on behalf of an entity that doesn’t exist
But, in the law of Agency, an unauthorised person can act as the agent of a principal because the principal DOES exist. It may well be the case that the principal has no idea about what this unauthorised person is getting up to! But, on subsequent discovery, the principal may say to her / himself ‘Hmmm, that’s a good deal that this unauthorised person has entered into apparently on my behalf. Yes, I think I’ll accept that deal even though the person had no right to enter into the contract’
But you’re correct – it’s not possible for a company to ratify a pre-incorporation contract
OK?
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