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Is it possible to ratify unauthorised representation?

Is it possible to ratify unauthorised representation?

Title 3 of book 3 of the Dutch Civil Code (‘BW’) contains provisions relating to the power of attorney. Article 3:69 BW determines that when someone has acted as the unauthorised representative of another, the latter can ratify this legal act, which means that the same result is realised as if it would have been performed pursuant to an actual power of attorney.

This article is important in the judgement of the Supreme Court of 3 February 2017. The case was as follows. In March 2007, A sold business premises to a BV (private limited company). The BV subsequently failed to comply with the obligations under the purchase agreement, after which A discovered that he had entered into the purchase agreement with a BV not yet in existence in March 2007. The BV was actually not incorporated until November 2007. At the time, the persons who incorporated the BV had signed the purchase agreement on behalf of the BV. The purchase agreement did not state that it concerned a BV in formation. The ratification as referred to in article 2:203 BW therefore does not apply. After all, no legal act had been performed on behalf of a company still to be formed, which means that the purchase cannot be ratified after the formation of the BV by the persons entering into the sale.

A holds the incorporators liable for unauthorised representation pursuant to article 3:70 BW (vouching for power of attorney). In its ruling of 4 August 2015, the Court of Appeal in ’s Hertogenbosch rejected this claim. This because the deed of incorporation of the BV stated that ‘all the legal acts to be performed by the incorporators on behalf of the company in formation are ratified by the company under the suspensive condition that the company is registered in the Commercial Register so that rights and obligations for the company arise from the date of said registration.’ The Court of Appeal determined that with this deed of incorporation, the BV had ratified the purchase agreement pursuant to article 3:69 BW, as a result of which the purchase agreement must be deemed valid from the beginning. This meant that by this ratification, the BV was able to give the purchase agreement the same effect as if it had been entered into on the basis of a power of attorney. With this, according to the Court of Appeal, any liability of the incorporators due to unauthorised representation lapsed.

The Supreme Court, however, ruled that in its judgement, the Court of Appeal had failed to recognise that ratification pursuant to article 3:69 BW requires that the statement must be directed to the other party – A therefore – and must have reached this other party (the receipt theory of article 3:37(3) BW). The undirected statement in the deed of incorporation did therefore not result in the desired ratification and did not remove any possible liability of the incorporators for unauthorised representation. The Supreme Court overturned the ruling of the Court of Appeal and referred the case to the Court of Appeal Arnhem-Leeuwarden for further hearing and decision.

By Marèl Baak

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