- Collection:
- Georgia Law Review
- Title:
- Delegated Contract Formation
- Creator:
- Lindley, Tyler B.
- Date of Original:
- 2025-01-01
- Subject:
- University of Georgia. School of Law
Law--Study and teaching
Georgia Law Review Association - Location:
- United States, Georgia, Clarke County, Athens, 33.96095, -83.37794
- Medium:
- articles
- Type:
- Text
- Format:
- application/pdf
- Description:
- It is well established that an agent’s act binds the principal only if the agent has actual or apparent authority, or if the principal ratifies the unauthorized act. But the legal status of the unauthorized agreement between the agent (purporting to act for the principal) and the third party remains unclear. Courts confusingly refer to it almost interchangeably as a “void” contract, as a “voidable” contract, and as a nonexistent or unformed contract. All three categories appear to fit uneasily, though: voidable contracts are presumptively valid and enforceable, void contracts cannot be ratified, and assent through ratification relates back to the time of the unauthorized agreement. One recent court decision even staked out a nonbinding fourth category—the font of new legal interests enforceable by fourth parties. This article answers how to consider these agreements by looking beyond the language the courts use and instead to the legal effect they afford such agreements in light of the underlying contract and agency principles at play. This fresh look reveals that, as a doctrinal matter, a lack of authority prevents a contract from forming at all: If the agent acts without actual or apparent authority and the principal does not ratify the act, the principal has not manifested the necessary assent, and so the agreement fails to satisfy the prerequisites of a contract. The third party’s assent to be bound by the agreement has the same legal effect as an offer: nontransferable, nonenforceable, and only temporarily open. This conclusion helps explain the effect of and limits on the principal’s ratification power. It provides grounding for how courts have handled questions of authority in the context of the Federal Arbitration Act. And it reveals that the FDIC’s handling of failed banks threatens to violate the Takings Clause should courts allow the FDIC to take non-assenting principals’ property as if the unauthorized agreement were a contract.
contracts -- agency -- ratification -- Law - External Identifiers:
- Metadata URL:
- https://digitalcommons.law.uga.edu/glr/vol59/iss3/4
- Holding Institution:
- Alexander Campbell King Law Library
- Rights:
-
