1. Facts of the Case
- ‘X’ holds a lease from ‘Y’, the lessor, which is terminable on three months’ notice by either party as per the lease agreement.
- An unauthorized person, ‘Z’, who had no authority from ‘Y’, issues a notice of termination to ‘X’ on behalf of ‘Y’.
- Later, ‘Y’ comes to know about the notice given by ‘Z’ and attempts to ratify or approve the act of ‘Z’.
- The legal question arises — whether this unauthorized notice of termination can be validated by subsequent ratification of ‘Y’.
The problem involves principles of agency under the Indian Contract Act, 1872, specifically dealing with unauthorized acts and ratification.
2. Issues in the Case
- Whether ‘Z’ had any authority, express or implied, to issue the termination notice on behalf of ‘Y’.
- Whether an act done without authority (by Z) can be ratified later by Y to make it binding on X.
- Whether the notice of termination given by Z is valid and effective from the date it was issued, or becomes valid only upon ratification by Y.
- Whether the ratification of the notice by Y can relate back to the date on which Z gave the notice.
3. Legal Principles Covered
a) Section 196 – Right of Person as to Acts Done Without Authority
“Where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or disown such acts. If he ratifies them, the same effects will follow as if they had been performed by his authority.”
- This section allows ratification of unauthorized acts, but only if the act was done on behalf of the person ratifying.
- Ratification gives the act a retrospective effect, as if it was authorized from the beginning.
However, there are limitations to this rule.
b) Section 197 – Ratification May Be Express or Implied
“Ratification may be express or may be implied in the conduct of the person on whose behalf the acts are done.”
- Y’s approval, either by words or by conduct, can amount to ratification.
c) Section 200 – No Ratification of Acts Done Without Intention to Act on Behalf of Another
“An act done by one person on his own account, or on behalf of another person not in existence at the time, cannot be ratified.”
- Therefore, ratification is valid only if Z acted on behalf of Y.
- If Z acted without intending to represent Y, or as an independent wrongdoer, then Y cannot ratify the act.
d) Section 201 – Termination of Agency
- The authority of an agent terminates when the purpose is accomplished or when it is revoked.
- Since Z was not an agent at all, his act cannot bind Y unless validly ratified under Section 196.
e) Case Laws
- Keighley Maxsted & Co. v. Durant (1901) AC 240 (HL)
- A person (agent) bought goods in his own name intending them for another without the principal’s authority.
- Later, the principal tried to ratify the contract, but the court held that ratification was invalid because the act was not done on behalf of the principal originally.
- Principle: Ratification is possible only if the unauthorized act was done in the name or on behalf of the person ratifying.
- Bolton Partners v. Lambert (1889) 41 Ch D 295
- The defendant made an offer to an agent who had no authority.
- The principal later ratified the agent’s acceptance.
- It was held that ratification related back to the date of the original act and the contract became binding.
- Principle: Ratification operates retrospectively but only if the unauthorized act was done on behalf of the principal.
- National Bank of Lahore Ltd. v. Sohan Lal (AIR 1962 Punj 534)
- It was held that an unauthorized act cannot be ratified if it prejudices the rights of third parties or alters their legal position before ratification.
- In this case, if X’s rights were affected before Y’s ratification, the notice cannot be validated later.
f) Application of Principles
- Z had no authority (neither express nor implied) to issue the termination notice to X.
- If Z issued the notice intending to act on behalf of Y, then Y may ratify it under Section 196, and such ratification will relate back to the date the notice was given.
- However, if Z acted on his own or without any intention to represent Y, then ratification is void under Section 200.
- Even if ratification is valid, it cannot adversely affect X’s rights that existed before Y’s ratification.
- Thus, the effectiveness of the notice depends on whether Z acted as Y’s representative and whether ratification prejudices X.
4. Possible Judgement
Findings:
- The lease agreement required a valid three-month notice by the lessor (Y) or an authorized agent.
- Z was unauthorized and thus not competent to issue such a notice.
- The notice of termination given by Z is void unless ratified by Y.
- Ratification is possible only if Z issued the notice on behalf of Y, not on his own account.
- Even after ratification, it will take effect from the date of ratification, not retrospectively, if it affects X’s vested rights.
Judgement:
The court would likely hold that the notice of termination given by Z was invalid at the time it was issued, since Z had no authority from Y.
If it is proved that Z acted on behalf of Y, Y can ratify the notice, and it will take effect from the date of ratification, not from the original date of notice.
However, if Z did not act as Y’s agent, or X’s rights were affected before ratification, the ratification will be invalid, and the notice will remain void.
About lawgnan:
Explore how the Indian Contract Act, 1872 governs unauthorized acts and ratification under Sections 196–200, as illustrated in this case. Learn how an unauthorized notice or agreement becomes valid only if ratified correctly, and why such ratification cannot prejudice third-party rights. Law students and professionals can understand how agency principles apply in real-life lease and contractual disputes. Strengthen your legal knowledge with expertly written notes, case analyses, and exam-based explanations. To access more simplified summaries of important Contract Law cases and principles, visit Lawgnan.in — your trusted platform for law learning.
