Lesson: Ratification of an Agreement

In this lesson, Nick Palazzolo, CPA, breaks down the intricacies of ratification within the principal-agent relationship, explaining its purpose as a legal mechanism for principals to retroactively endorse an agent's actions. He unpacks key concepts, such as the conditions under which a principal can ratify an action and the implications of such endorsement, including the necessity for the principal to have complete knowledge of the relevant facts. Illustrating his points with practical examples, Nick clarifies how ratification functions when an agent steps outside their authority, the importance of good faith actions by the agent, and the inability of ratification to legitimize illegal contracts. The explanation extends to cover topics like the unnecessary notification of third parties upon ratification and the stipulations if the third party withdraws or if the actions become illegal post-agreement. By the end of the lesson, it is clear that understanding the boundaries and conditions of ratification is crucial in navigating the legal aspects of the principal-agent dynamic.