First Principles of Business Law

4. Ratification of previously unauthorised acts

4.3. Ratification by an undisclosed principal

Read the facts below, and then answer the questions.

A is a collector of Australian stamps. He decides to sell his collection and tells his neighbour B about it. B is not interested in stamps, but thinks his friend C would want them. Not wanting to give A any reason to increase the price, B does not tell A that he is buying the stamps for C: he simply offers A $1000 for the collection and A accepts the offer. B then tells C that he has purchased A's stamps on C's behalf. C approves what B has done and now wants to pay A the agreed price and get the stamps. A says he would not have sold the stamps so cheaply to anyone but B, and refuses to accept that he is bound by contract to C.

1. Was B authorised to acquire the stamps on behalf of C?

2. Did B make it known that he was acting as an agent for C when purchasing the stamps from A?

3. In these circumstances, does C's ratification of B's act give B the necessary authority to create a contract between A and C?