The Iraqi Federal Court of Cassation has confirmed that a transaction concluded by an agent outside the limits of authority may become binding if the principal later approves it expressly or through conduct demonstrating acceptance.
Background
An agent entered into a financing arrangement connected with an investment project. The principal later argued that the agent had exceeded the power of attorney, although the principal had submitted and relied on the agreement in dealings with the investment authority.
Court’s Findings
The Court accepted that the agent had acted beyond the precise authority granted. The agreement was suspended rather than finally void and could become effective through ratification.
Submission of the agreement to the investment authority and conduct consistent with its existence amounted to implied approval. The right to approve or reject also had to be exercised within the statutory period.
Practical Implications
Principals should define authority precisely, monitor transactions, issue immediate written objections to unauthorised acts and avoid relying on an agreement they intend to reject. Counterparties should obtain written ratification where authority is uncertain.
Conclusion
The decision shows that post-contract conduct may be as important as the wording of the original power of attorney. A principal’s use of the transaction may prevent a later challenge based on lack of authority.