may be imputed to the principal in accordance with the general rule making notice to an agent notice to his principal. These rules are as applicable to ratifications where the principal is a corporation as to cases where the principal is not a corporation. Thus, ratification by the directors of an unauthorized contract by an officer, in the proper sense of the term "ratification," cannot be implied from their failure to disaffirm the same, unless they had actual knowledge of the contract. The fact that, in the proper discharge of their duties, they ought to have known of it, is not enough." But if their ignorance was due to negligence and inattention in the discharge of their duties and third persons have acted in reliance on their apparent knowledge and acquiescence, the corporation may be estopped to deny that the contract was authorized or ratified.8

61 Mechem, Agency (2nd Ed.), §§ 403-407.

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7 In an action against a corporation on a contract executed by its presi dent without authority, where the plaintiff had performed all the acts required of him by the contract, and relied upon the acquiescence of the directors as a ratification, it was held error to charge the jury that "all directors are presumed to know what it is their duty to know, what they are able to know, and what they undertook to know when they accepted the responsibility of directors," and that, "in the absence of direct and positive evidence of the knowledge of the directors, jurors have the right to assume that they are doing what they were appointed to do, and that they know what they are appointed to know." The party relying on a ratification, said the court, must show that the directors, or a majority of them, actually knew of the contract and its terms, and with such knowledge acquiesced in it. Murray v. Nelson Lumber Co., 143 Mass. 250, 9 N. E. 634. Compare, however, Michigan Cent. R. Co. v. Chicago, K. & S. R. Co., 132 Mich. 324, 93 N. W. 882, 9 Det. L. N. 627.

Where a bank acted fraudulently in accepting an unauthorized pledge

Moreover, in corporation cases,

of another bank's credit from its cashier, it was held that the latter bank could not be held to have ratified the transaction because of the negligence of its officers and stockholders in not discovering the fraud. Ft. Dearborn Nat. Bank v. Seymour, 75 Minn. 100, 77 N. W. 543.

Under some circumstances, however, where the directors accept the benefits of a contract made by an officer or agent without authority, it is their duty to inquire into the terms of the contract and to give timely notice if they do not propose to be bound thereby. Bauersmith V. Extreme Gold Mining & Milling Co., 146 Fed. 95, 99; Scott v. Middletown, U. & W. G. R. Co., 86 N. Y. 200.

8 Mobile & M. Ry. Co. v. Gilmer, 85 Ala. 422, 5 So. 138; Campbell v. Pope, 96 Mo. 468, 10 S. W. 187; Scott v. Middletown, U. & W. G. R. Co., 86 N. Y. 200; Currie v. Bowman, 25 Ore. 364, 35 Pac. 848.

"If the directors, in the exercise of ordinary care, ought to have known of the execution of the contract it is in law as if they

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knew." Smith v. Bank of New England, 72 N. H. 4, 9, 54 Atl. 385.

Where a railroad company received material bought upon its credit and for its use by one of its officers with

it has been held that the circumstances of the case may be such that the court or jury may presume knowledge on the part of the stockholders or of the directors or other officers whose knowledge is imputable to the corporation; and knowledge upon the part of the corporation will be presumed from slight circumstances where it has had the benefit of the contract.10 If an unauthorized contract or other transaction appears on the books of the corporation, which are subject to inspection by the officer or officers having authority to out authority, and used it for the corporate purposes for which it was designed, it was held that this was an adoption and ratification of the act of the officer; that the directors using the material so purchased were bound to inquire, and were presumed to know, whether it was paid for or not; and that it was not necessary, therefore, to show that the directors knew the terms of the contract. Scott v. Middletown, U. & W. G. R. Co., 86 N. Y. 200.

A nontrading corporation is not liable for money loaned its general manager who had no authority to borrow money, on the theory of negligence in failing to examine pass books issued to the manager by the lending banks and which contained entries relating to the loans. Sedalia Nat. Bank v. Economy Steam Heating & Electric Co., 145 Mo. App. 319, 130 S. W. 377, distinguishing Hennessy Bros. & Evans Co. v. Memphis Nat. Bank, 129 Fed. 557, in which latter case the manager had power to borrow money.

9 United States. Egbert v. Sun Co., 126 Fed. 568.

California. Blen v. Bear River & A. Water & Mining Co., 20 Cal. 602, 81 Am. Dec. 132.

Missouri. Campbell v. Pope, 96 Mo. 468, 10 S. W. 187.

New York. Scott v. Middletown, U. & W. G. R. Co., 86 N. Y. 200; Curtis v. Natalie Anthracite Coal Co., 89 App. Div. 61, 85 N. Y. Supp. 413, aff'g 39 Misc. 586, 80 N. Y. Supp. 603.

Wisconsin. Racine County Bank v. Lathrop, 12 Wis. 466.

Knowledge may be shown by circumstantial evidence. Danglade & Robinson Min. Co. v. Mexico-Joplin Land Co., Mo. App., 190 S. W.

35.

In Blen v. Bear River & A. Water & Mining Co., 20 Cal. 602, 81 Am. Dec. 132, it was said: "A ratification supposes a knowledge of the thing ratified, and in the case of a contract, the inference from the ratification is, that its provisions were known. When the ratification is proved, this inference necessarily follows, and if there was any mistake or misapprehension, that fact must be shown."

Knowledge of act of superintendent of railroad in posting offers of reward for conviction of persons obstructing the road, as inferred, see Central Railroad & Banking Co. v. Cheatham, 85 Ala. 292, 7 Am. St. Rep. 48, 4 So. 828; Arkansas Southwestern R. Co. v. Dickinson, 78 Ark. 483, 115 Am. St. Rep. 54, 95 S. W. 802.

The fact that the secretary made out a statement of the debts of the corporation in gross was held insufficient to give the stockholders or directors notice of an unauthorized note executed by him and the president, and included in the statement. Edwards v. Carson Water Co., 21 Nev. 469, 34 Pac. 381.

10 Pannebaker v. Tuscarora Valley R. Co., 219 Pa. 60, 67 Atl. 923. See also § 2204, infra.

authorize or ratify such transactions, his knowledge of the same may be presumed, unless the circumstances are such as to rebut the presumption.11

If the stockholders, directors or other officers elect to ratify without inquiry as to the facts, their conduct is equivalent to knowledge.12 The rule is stated in a leading work on agency as follows: "It is an essential element of a valid ratification that the principal shall have a full knowledge of all material facts, unless he intentionally and deliberately ratifies when he knows that he has no such knowledge, not caring to make further inquiry into the matter. It is his privilege if he so desires, to intentionally ratify the unauthorized acts of his agent or of an assumed agent, without full knowledge of the facts, and if he is misled he cannot complain." 13

§ 2184. Partial knowledge. Ratification of an unauthorized contract must have been made with knowledge of all of its terms, at least unless it is ratified with knowledge that all its terms are not known, and without regard thereto.14 Thus, acceptance of the benefits of a contract is no estoppel where such acceptance was without knowl-* edge of unauthorized provisions in the contract, at least where the contract was an oral one.15 And knowledge that a corporate officer has made a contract is not necessarily knowledge of unauthorized agreements in connection therewith,16

§ 2185. Knowledge of officer or agent as imputable to corporation. Knowledge of officers or agents may, in certain cases, be imputed to the corporation, so that knowledge of the officer or agent is considered as the knowledge of the corporation, within this rule,17

but the knowledge necessary must be that of some officer or agent other than the wrongdoer.18 Thus, the knowledge of the president of a corporation, who has signed a contract without authority of the directors, is not knowledge on the part of the corporation, where the other stockholders and directors have no knowledge of it.19 For the purpose of ratification or estoppel by acquiescence, knowledge on the part of an officer or officers having authority in the premises is knowledge on the part of the corporation.20 But knowledge on the part of an officer who has no authority to bind the corporation is not imputable to it.21 Where an unauthorized contract can only be

Where a superintendent of a corporation was authorized by the general manager to sell a vessel belonging to the corporation, a broker's commission to be deducted from the sale price, the manager assuming that his acts would be ratified by the corporation, and after a sale had been made through a broker employed by the superintendent the sale was ratified at a meeting at which the manager was present and participated as a director, the ratification was deemed to have been made with knowledge of the facts concerning the sale which the manager possessed. Hartford & N. Y. Transp. Co. v. Plymer, 120 Fed.

19 Bi-Spool Sew. Mach. Co. v. Acme Mfg. Co., 153 Mass. 404, 26 N. E. 991. Compare Mobile & M. Ry. Co. v. Gilmer, 85 Ala. 422, 5 So. 138.

20 Ditty v. Dominion Nat. Bank, 75 Fed. 769; Mobile & M. Ry. Co. v. Gilmer, 85 Ala. 422, 5 So. 138; Chouteau v. Allen, 70 Mo. 290.

21 United States. American Surety Co. v. Pauly, 170 U. S. 133, 12 L. Ed.

977.

Colorado. Union Gold Min. Co. v. Rocky Mountain Nat. Bank, 2 Colo. 248, 565.

Massachusetts. Bi-Spool Sew. Mach. Co. v. Acme Mfg. Co., 153 Mass.

404, 26 N. E. 991; Murray v. Nelson Lumber Co., 143 Mass. 250, 9 N. E. 634.

Minnesota. Ft. Dearborn Nat. Bank of Chicago v. Seymour, 71 Minn. 81, 73 N. W. 724.

Nevada. Edwards v. Carson Water Co., 21 Nev. 469, 34 Pac. 381; Yellow Jacket Silver Min. Co. v. Stevenson, 5 Nev. 224.

Vermont. Lyndon Mill Co. v. Lyndon Literary & Biblical Inst., 63 Vt. 581, 25 Am. St. Rep. 783, 22 Atl. 575.

A corporation is not chargeable with notice that an officer, having no authority to do so, has executed a note in its name. Helena Nat. Bank v. Rocky Mountain Tel. Co., 20 Mont. 379, 63 Am. St. Rep. 628, 51 Pac. 829.

A president of a national bank has no authority, in the usual course of business, to certify to the fidelity and integrity of the cashier for the purpose of enabling him to procure a bond insuring his fidelity, and therefore the bank cannot be deemed, merely by virtue of the president's relation to it, to have knowledge of his giving such certificate. American Surety Co. v. Pauly, 170 U. S. 133, 12 L. Ed. 977.

Knowledge of the cashier and two directors of a bank that the cashier has pledged the bank's credit, without authority, on the note of a corporation in which he and such directors are interested, is not notice to the

ratified by the board of directors or trustees, knowledge thereof on the part of a minority of the board individually is not enough.22 In order that a corporation may be bound by acquiescence of its directors in an unauthorized act of one of its officers, it is not necessary that notice thereof shall be given them while sitting as a board. It is sufficient if they are personally cognizant thereof and do not call a meeting to disavow it.23

Whether notice to or knowledge of a particular officer or agent of the corporation is notice to or knowledge of the corporation is considered at length in the next following subdivision.

§ 2186. Who may ratify-General rules. Unauthorized or irregular contracts or other acts by the officers or agents of a corporation cannot be ratified except by a person or persons having authority to authorize the same, and bind the corporation. Obviously, an officer or officers who have no power to do or authorize an act have no power to ratify such an act.24

On the other hand, at least presumably, any officer having authority to do or authorize an act has the same authority to ratify it if done bank. Ft. Dearborn Nat. Bank of Chicago v. Seymour, 71 Minn. 81, 73 N. W. 724.

A corporation is not chargeable with notice of an unauthorized contract of employment made by an agent, because of such agent's copying of letters evidencing the contract in the company's letter book, where the officers of the company have no knowledge thereof. Camacho v. Hamilton Bank Note & Engraving Co., 2 N. Y. App. Div. 369, 37 N. Y. Supp. 725.

22 Yellow Jacket Silver Min. Co. v. Stevenson, 5 Nev. 224; Elwell V. Puget Sound & C. R. Co., 7 Wash. 487, 35 Pac. 376.

23 Henry v. Colorado Land & Water Co., 10 Colo. App. 14, 51 Pac. 90; Kelsey v. National Bank of Crawford County, 69 Pa. St. 426.

24 Colorado. Union Gold Min. Co. v. Rocky Mountain Nat. Bank, 2 Colo. 565.

Iowa. Tracy v. Guthrie County Agr. Society, 47 Iowa 27.

Pennsylvania. In re Crum's Appeal, 66 Pa. St. 474.

Texas. Pabst Brewing Co. V. Emerson (Tex. Civ. App.), 36 S. W.

342.

Vermont. Lyndon Mill Co. v. Lyndon Literary & Biblical Institute, 63 Vt. 581, 25 Am. St. Rep. 783, 22 Atl. 575.

Compare Parmly v. Buckley, 103 Ill.

115.

Irregular corporate action may be made binding by ratification on the part of the corporate body which might have taken the action originally. Kessler v. Ensley Co., 123 Fed.

And in Edwards v. Carson Water Co., 21 Nev. 469, 34 Pac. 381, it was held that where the power to authorize the execution of notes by a corporation was in the board of trustees, the trustees could not be held to have ratified the act of the president and secretary, who had executed a note, by reason of the knowledge of a ma- 546. jority, acquired while acting as president and secretary.