NCA Business Organizations Practice Questions - NCA Business Organizations (Business Associations) Examination Exam

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An agent enters into a contract purportedly on behalf of a principal but in fact has no authority to do so. The principal later learns of the contract and, with full knowledge, accepts its benefits and treats it as binding. What is the legal effect?

The contract remains void because authority cannot be created after the fact The principal has ratified the contract, which is treated as authorized from the outset Only the agent is bound, because ratification requires a fresh signed agreement The third party may rescind because ratification is ineffective against an unauthorized act

Correct Answer:

The principal has ratified the contract, which is treated as authorized from the outset

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