In In Re Northlake Development LLC, what is the effect if the principal does not ratify the agent's unauthorized actions?

• A. The action is binding on the principal
• B. The action is void ab initio
• C. The action is enforceable against third parties only
• D. The action becomes voidable at the option of the agent

Answer: (B)

The key idea is how authority and ratification work in agency. When an agent acts without actual authority, the principal is not bound unless the principal later ratifies the act. Ratification creates retroactive authority, making the act as if the agent had authority from the start. If there is no ratification, there is no binding effect on the principal—the transaction doesn’t take effect against the principal at all.

Because the principal does not ratify, the unauthorized action is treated as void from the beginning. That means the principal cannot be held to the contract, nor can the act be enforced against the principal or third parties on that basis. The agent may face liability for acting without authority, but the principal remains unbound.

In this context, that is why the action is described as void ab initio. The other options would require authority, or would misstate who can compel or avoid enforcement, which isn’t consistent with a lack of ratification.