[Anonymous]

What difference does it make if the principal is undisclosed or not?

---

Which of the following principals may normally ratify an unauthorized contract made by an agent?

I. Fully disclosed principal.

II. Partially disclosed principal.

III. Undisclosed principal.

A. I only.

B. I and II only.

C. II and III only.

D. I, II, and III.

B. This answer is correct because both partially disclosed and fully disclosed principals can ratify an unauthorized contact.

[Anonymous]

Problems like this are why I took REG 8 freaking times!

I always had to “draw a picture” of the situation. Let's assume that the contract is about the purchase of some inventory.

A = Principal

B = Agent

C = Inventory Owner

Let's say A and C hate each other and have for years. C has some inventory that A really, really, really needs. So A hires B to negotiate with C. A tells B that he will pay $1 per widget. B understands the terms of his agreement with A and the limit that A will pay C.

B makes a deal with C to purchase the widgets at $1.10 each. C has no clue that A is the actual buyer or he might jack up the price to $1.50 each. Since A is an undisclosed principal, C can't force A to ratify the contract and buy the inventory at the inflated price. I believe that C can go back on B for the loss, but I'm not sure about that.

Does this help clear it up?

[Anonymous]

Because one of the requirements of ratification is that the 3rd party has to know that the agent is representing a principal. Thus if the principal is undisclosed, the 3rd party does not know the agent is representing anybody, so the requirement for ratification is not met.

[Anonymous]

I took REG last month, and I have no idea.

Yikes.

[Author]

Replies