Opinion ID: 2611465
Heading Depth: 1
Heading Rank: 3

Heading: Ratification by conduct

Text: The doctrine of ratification by conduct is similar in application to the principle of estoppel discussed above, however it operates to make the contract legally valid rather than simply preventing a party from challenging the contract's validity. Id. In addition, it is based on a theory of mutual assent, which does not require the showing of detrimental reliance necessary for estoppel. Id. Generally, contract ratification is the adoption of a previously formed contract, notwithstanding a quality that rendered it relatively void and by the very act of ratification the party affirming becomes bound by it and entitled to all proper benefits from it. Schagun v. Scott Mfg. Co., 162 F. 209, 219 (8th Cir.1908). Respondents rely on Clark Realty Co. v. Douglas, 46 Nev. 378, 212 P. 466 (1923), for their proposition that occupancy of land and payment of rent under an invalid lease creates only a month-to-month or year-to-year tenancy. The district court was apparently persuaded by this citation, as it found that the initially invalid lease between Merrill and Respondents effected a tenancy at will. A closer reading of Clark suggests an entirely different conclusion. In Clark, the court declined to find that a mere periodic tenancy resulted from the invalid lease because a void lease, inasmuch as the lessor had no authority to make it, . . . was not, properly speaking, an invalid lease; . . . it complied with all the legal requirements as to form and substance. Id. at 387, 212 P. at 469. The court observed that a periodic tenancy results only when the lease is inherently inadequate, as when it violates the statute of frauds. Id. at 385-386, 212 P. at 468. The court went on to hold that the lease had been ratified by subsequent conduct of the parties, applying the general rule that [o]ccupation of the premises by lessee, and payment of rent according to the terms of the lease, is usually held to be a ratification by the lessee of an invalid lease. Id. at 386, 212 P. at 468 (citing to 24 Cyc. 911). In addition to Respondents' payment of rent and possession of the property, Merrill argues that Respondents' entry into a sublease agreement, in which DeMott and Welty subleased the property to JeffJohn, Inc., effectively ratified the master lease. DeMott's and Welty's written guarantee that JeffJohn, Inc. would pay all rent and satisfy each and every one of the terms, conditions, and covenants of the master lease certainly seems to express an intent to be bound by the master lease. While Merrill cites to persuasive authority for the proposition that an assignment serves to ratify a previously invalid lease as a matter of law, [2] he provides no authority suggesting that this rule applies to subleases. However, the sublease and DeMott's and Welty's guarantee of compliance with the terms of the master lease provide powerful corroboration for Merrill's assertion that the parties conducted themselves as though they intended to be bound by the master lease. We find that the lease in the instant case falls squarely under the rule of ratification as expressed in Clark because it is valid as to form and substance, and was arguably invalid at the time of execution due only to Merrill's lack of authority to lease land which he did not yet own. After Merrill cured his lack of authority to lease the property by obtaining fee title at the close of escrow, Respondents continued to occupy the premises and pay rent due under the lease. Respondents' sublease and guarantee further evidenced their intent to be bound by the terms of the master lease. This conduct satisfies the requirements for ratification under Clark. Accordingly, we conclude that the district court erred in failing to find that the lease agreement was ratified by the parties' conduct subsequent to Merrill's acquisition of fee title to the leased property.