What is meant by 'Ratification' in the context of agency authority?

In the context of agency authority, 'Ratification' refers to the principal's approval of actions taken beyond the agent's authority. This concept comes into play when an agent acts on behalf of a principal but exceeds their designated powers or authority. If the principal later agrees to and accepts those actions, either expressively or implicitly, they effectively validate the agent’s actions, thus creating legal obligations as if the agent had the authority from the outset. This means that the principal can be bound by the agreements made by the agent during this unauthorized action, which underscores the importance of the agent’s position and the principal’s ability to affirm or reject such actions.

This understanding of ratification is crucial in agency relationships, emphasizing that even if actions are taken outside an agent's authority, they can still be legitimized if the principal ratifies them. This process of ratification can foster trust and cooperation between the principal and the agent while establishing the effectiveness of the agent's actions once approved.