Ratification and Undisclosed Principals

Abstract

In the law of agency, ratification by undisclosed principals is treated differently from ratification by disclosed or partially disclosed principals. The generally accepted rule is that undisclosed principals cannot ratify contracts that their agents have entered into on their behalf. After analyzing the rights and liabilities of undisclosed principals on authorized transactions, the rights of disclosed and partially disclosed principals to ratify unauthorized transactions, as well as analyzing various policy considerations, the author concludes that the traditional arguments derived from these areas are not sufficient to ground a rule precluding ratification by undisclosed principals. The author concludes that ratification by undisclosed principals should be allowed.

Keywords: law of agency, undislosed principals, contracts, transactions

JEL Classification: K12, K23