Approval of Invalid Dispositions: Ratification in Norwegian Contract Law

Introduction: Can an Invalid Contract Be Validated?

In principle, a contract that falls under a ground for nullity is exactly that - invalid. However, in many cases, an originally invalid contract can later be ratified by the party whom the nullity rule seeks to protect. This article explains when and how an invalid disposition can be remedied through subsequent approval, which limitations apply, and what legal effects such approval entails.

Limitations on the Right to Ratify

Although the main rule is that many invalid dispositions can be ratified, there are several important limitations:

1. Counterparty Interests: A unilateral right to ratify may allow the promisor to speculate by ratifying favorable contracts while invoking invalidity for unfavorable ones.

2. Public Interests: Some grounds for invalidity are justified by considerations beyond the parties' interests, which can limit the right to ratify.

3. Validity of the Ratification Promise: The approval itself must meet the requirements of a valid disposition. For example, a person who is still a minor cannot "approve" their previously invalid promise.

Which Grounds for Nullity Can Be Remedied?

Capacity Deficiencies

Contracts that are invalid due to capacity deficiencies can, in principle, be remedied:

• Mental Illness: A person who has recovered can approve contracts made during their mental illness.

• Minority: A guardian can approve dispositions made by minors (cf. Guardianship Act § 14)

• Person Who Has Reached Majority: A person who has reached the age of majority can approve dispositions they made as a minor.

Defects in Formation

Contracts that are invalid due to defects in formation can generally be ratified:

• Coercion, Fraud, Forgery and Falsification: Can be approved when the circumstances that caused the invalidity no longer influence the promisor.

• Misunderstanding: Can be approved when the misunderstanding is clarified.

The central premise is that the condition that caused the invalidity does not still adhere to the promise. A person who is still under duress cannot, of course, validly "approve" their disposition.

Content Defects

In the case of content defects, the picture is more complex:

• Contracts Against Law and Decency (NL 5-1-2): Can normally not be ratified as they conflict with public interests.

• Mandatory Rules to Protect Weak Contracting Parties: Here it is often crucial whether the approval occurs before or after the protected situation has arisen:

  • A prior waiver of consumer rights is normally invalid and cannot be ratified.

  • A subsequent waiver, when the consumer is aware of their rights and the relevant situation, may however be valid.

For rules like the Contract Act § 36 and the Pricing Regulations Act § 2, the same principle applies: One cannot in advance waive the protection these provisions grant, but can approve the contract after the unfairness has materialized and awareness of the circumstances is achieved.

Can the Counterparty Resist Ratification?

A key question is whether the counterparty can resist the ratification of an invalid contract. An unwritten legal principle applies here:

A counterparty in good faith can resist the promisor's unilateral ratification of an invalid contract.

This principle is based on an analogy from the Guardianship Act § 14 third paragraph, which for its area of application has a rule on the counterparty's right to oppose ratification where the guardian wishes to approve a contract that is invalid due to minority.

The rationale is that a counterparty who neither knew nor should have known about the invalidity when they received the promise should not be exposed to the promisor's speculative right. The counterparty typically had expectations that the contract was valid and may have arranged themselves accordingly.

Form and Content Requirements for Approval

For a disposition to be considered a valid approval, certain requirements must be met:

• Clarity Requirement: The disposition must reasonably clearly reveal that it constitutes an approval.

• Form Requirement: It is normally required that the approval be presented orally or in writing.

• Skepticism towards Passivity: Approval in the form of passivity or by voluntary fulfillment should be approached with skepticism.

The approval disposition becomes binding for the giver when the counterparty becomes aware of it, similar to other promises.

Legal Effects of Approval

When an invalid contract is ratified, it is traditionally considered as if it had been valid all along. The effect is thus ex tunc (from that time) and not just ex nunc (from now onwards).

For the approval of minors' dispositions, this is explicitly stipulated in the Guardianship Act § 14 second paragraph second sentence: An approved disposition is effective from the time the disposition was made, not from the approval time.

In other cases, reservations must be made where a third party after the contract was entered into, but before the ratification, may have acquired a right or obligation affecting the contractual relationship. These complex questions must be resolved concretely based on the real considerations at stake in each specific case.

Conclusion: The Balance Between Contractual Freedom and Protective Considerations

The rules on the approval of invalid dispositions illustrate the tension between two fundamental considerations in contract law:

1. Contractual Freedom which suggests that parties should be able to manage their rights.

2. Protective Considerations which justify the rules of invalidity in the first instance.

The rules on ratification attempt to balance these considerations by allowing approval where the need for protection is no longer present, while the limitations ensure that both public interests and the interests of bona fide counterparties are safeguarded.

For professionals working with contract law issues, it is important to understand the nuances of these rules to assess when an originally invalid contract can or cannot be salvaged through subsequent approval.