What is referred to as agency by ratification?

Agency by ratification occurs when an agent performs an action on behalf of a principal without prior authorization, and the principal later approves or accepts that action. This means that even though the agent initially acted outside their authority or without express permission, the principal can choose to acknowledge and validate that action after the fact. This retrospective approval creates a binding agency relationship for the actions taken.

In this context, it’s important to understand the concept of ratification. It allows principals to benefit from actions that they did not authorize at the beginning but decide to approve upon discovery. This is critical in real estate transactions, where agents sometimes may need to act swiftly to seize opportunities that could benefit their clients.

The other options outline different types of agency relationships or actions. For instance, the notion of an agency relationship agreed upon beforehand describes a typical agency arrangement, but it does not pertain to the concept of agency by ratification. A formal agreement and a relationship created through power of attorney also represent different structures of agency and do not incorporate the essential feature of retrospective approval that defines agency by ratification.