Keighly Maxsted & Co vs Durant
(1901) AC 240
Case Summary
[Section 197 - Ratification may be express or implied]
Facts
Keighly, Maxsted & Co authorized their agent to purchase wheat at a specified price. The agent, acting beyond his authority, entered into a contract with Durant to purchase wheat at a higher price but did so in his own name and not on behalf of Keighly, Maxsted & Co. When the price of wheat fell, Keighly, Maxsted & Co refused to accept delivery. Durant sued for breach of contract. Keighly, Maxsted & Co contended that they were not bound by the contract as it was unauthorized.
Issues
Can a principal ratify a contract made by an agent who did not disclose the principal’s existence?
Is Keighly, Maxsted & Co liable for the contract entered into by their agent in his own name?
Relevant Legal Provisions Indian Contract Act, 1872
Section 197 - [Ratification may be expressed or implied] Ratification may be expressed or may be implied in the conduct of the person on whose behalf the acts are done.
Judgement
The House of Lords held that Keighly, Maxsted & Co could not be bound by the contract. For ratification to be valid, the agent must have entered into the contract explicitly on behalf of the principal. In this case, the agent contracted in his own name without disclosing the principal’s existence. Since the third party (Durant) was unaware of the principal, Keighly, Maxsted & Co could not adopt the contract retrospectively through ratification.
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