Ratification of agreement: Overview, definition, and example
What is ratification of agreement?
Ratification of an agreement refers to the formal approval or confirmation of a contract or legal action, making it valid and enforceable. This can occur when a party accepts the terms of an agreement after it has been signed, when a company’s board approves a contract, or when a party affirms an agreement that was previously unauthorized.
For example, if a company executive signs a contract without proper authorization, the company’s board of directors may later ratify the agreement, making it legally binding.
Why is ratification of agreement important?
Ratification is important because it ensures that agreements are properly authorized and enforceable. It allows parties to validate contracts that may have been entered into informally or without full authority at the time of signing.
For businesses, ratification is commonly used in corporate governance to approve contracts, mergers, or policy decisions that require formal acceptance by shareholders or directors. It also helps avoid legal disputes by clarifying that all parties accept the agreement’s terms.
Understanding ratification of agreement through an example
A startup’s CEO enters into a contract with a supplier, but the company’s bylaws require board approval for contracts over $100,000. After reviewing the contract, the board of directors formally ratifies the agreement, making it legally binding on the company.
In another case, a partner in a law firm negotiates a lease for office space but does not have the authority to sign contracts. The other partners review and ratify the lease agreement, ensuring that the firm is legally bound to the terms.
Example of a ratification of agreement clause
Here’s how a ratification of agreement clause might appear in a contract:
“Each Party represents and warrants that this Agreement has been duly ratified and approved by all necessary corporate or governing body actions. Any prior acts taken in connection with this Agreement are hereby ratified and confirmed as legally valid and binding.”
Conclusion
Ratification of an agreement confirms and legally validates a contract or decision that may not have been fully authorized at the time of execution. It is commonly used in corporate settings, contract negotiations, and governance matters to ensure formal approval. Including a ratification clause in contracts helps prevent disputes and provides legal certainty that all parties accept and recognize the agreement.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.