Story Case

Arthur Sentz, an accountant employed by Howard Noble, a grain dealer, sold a thousand bushels of wheat for the latter without having authority to do the act. Noble learned of the deal shortly thereafter, when wheat had decreased in value. He said nothing about the transaction, and he made no objection when the bookkeeper, who usually made out the transfer sheets, recorded this sale in the usual course of business. A few days later the man who bought of Sentz demanded his wheat. In the meantime the price had gone up and Noble refused to deliver the grain on the ground that Sentz had no authority to act. Is Noble liable for failing to deliver the grain?

Ruling Court Case. Ehrmantraut Vs. Robinson Et Als, Volume 52 Minnesota Reports, Page 333; Also Volume 54 Northwestern Reporter, 188

Hervin and Wilson were members of an unincorporated benevolent club. Robinson and Larson, also members, acted as trustees and agents for the organization. Without any authority they rented a hall from the plaintiff for five years at an annual rent of $300. The organization went into the hall knowing that their right to occupy the same depended upon some contract made by Robinson and Larson with the owner. But they did not know what the terms were, and it was never discussed by them as a part of the business of the club.

After the expiration of a year the organization disbanded. The owner of the hall brought this action to recover damages for breach of contract. It was contended by Hervin and Wilson that they were not liable because Robinson and Larson acted without authority.

Justice Mitchell delivered the opinion: Since this was a benevolent club, the members were not partners. Accordingly the liability of each must depend upon whether he authorized the act done, or subsequently ratified it. The Court was of the opinion that Hervin and Wilson, by their conduct and acceptance of the benefits of the contract impliedly ratified the unauthorized contract of Robinson and Larson. The Court said in part: "Where, as in the present case, the defendants, Hervin and Wilson, had notice that an authorized contract had been made in their behalf for the use of these premises, it was their duty, before accepting its benefits, to ascertain what the terms of that contract were. By going into possession and enjoying the use of the premises, without any attempt to ascertain the terms of the lease under which they entered, they must be held to have deliberately intended to take the risk of ratifying upon such knowledge as they had."

Ruling Law. Story Case Answer

Ratification may also be implied from circumstances or from the conduct of the principal. Whether the principal has ratified is primarily a question of intention. Various circumstances and conduct on his part, though not conclusively establishing, are nevertheless evidence of an intent to ratify. Ratification may be implied from the fact that the principal has offered to perform the contract or from the fact that he insists upon the other party performing. If he accepts any benefits whatsoever from a given transaction, a ratification will generally be implied, provided he knew all the material facts in respect thereto. He is generally held to have ratified in case he brings a suit upon, or utilizes the transaction as a defense. If the unauthorized act was one which was done in excess of authority by his agent, then his silence after knowledge of the unauthorized act will bind him. In such a case it is the duty of the principal to repudiate the transaction immediately upon learning of it. If, however, a complete stranger purports to act for another, the silence of the latter is only slight evidence of an intention to ratify.

In the Story Case, Noble would be liable for failing to deliver the grain. His conduct in allowing his bookkeeper to make a record of the transaction in the regular course of business was such as to amount to a ratification.