Which concept occurs when the principal approves a previously unauthorized action after it has occurred, binding the principal to the action?

• A. Agency
• B. Duty of loyalty
• C. Apparent authority
• D. Ratification

Answer: (D)

Ratification is the act of a principal approving an action taken by an agent after the fact, so the principal becomes bound to that action as if it had been authorized from the beginning. For ratification to take place, the principal must understand the material facts of what the agent did and intend to adopt or accept the result of those acts. The approval can be explicit or implied by the principal’s conduct, such as accepting the benefits of the deal or indicating consent after learning what occurred. Once ratified, the contract or obligation takes effect retroactively, and the agent’s act is treated as if the principal had authorized it all along.

This differs from apparent authority, where a third party reasonably believes the agent has authority because of the principal’s representations or conduct, even if the agent lacked actual authority. It also differs from general agency or fiduciary duties, which describe relationships and duties, not the post hoc adoption of unauthorized acts.