Oregon Court of Appeals applies doctrine of ratification to enforce contract

Last week, in Lemley v. Lemley, the Oregon Court of Appeals held that a settlement agreement to transfer an interest in real property is enforceable even though the agreement was executed by an attorney who lacked written authority to enter into the settlement on his client's behalf.

The case offers the karmic lesson that it is better to honor one's agreements than to seek relief through perceived legal loopholes.  The parties in Lemley conducted several years of contentious court battles following their divorce.  Before a round of appeals, the parties reached a settlement of their ongoing dispute over money and real property.  The defendant's attorney signed a letter setting out the settlement, and the plaintiff subsequently honored all of his obligations under the agreement.  When it came time for the defendant to transfer real property to the plaintiff, she balked and claimed she was not obligated to transfer the real property because her attorney was not authorized to enter into a settlement on her behalf.  The trial court sided with the defendant, as it reluctantly found she did not provide her attorney with written authority to settle.  As a result, according to the trial court, the attorney lacked actual or apparent agency to agree to the terms of the settlement.

The Court of Appeals did not address whether the attorney possessed authority under the law of agency to bind the defendant to the settlement agreement.  Instead, the court concluded the defendant ratified the settlement agreement because the evidence showed she knew about its material terms and knowingly accepted its benefits.  As a result of the ratification, the agreement was enforced as if the attorney had actual authority.