What occurs when a principal gives the impression that a third party is their agent?

When a principal creates the impression that a third party is acting as their agent, this concept is known as Agency by Estoppel. This situation arises when a principal's actions or conduct lead a third party to reasonably believe that an agency relationship exists, even if the principal has not formally established one.

In such cases, if the third party relies on this belief and acts upon it, the principal may be bound by the actions of that third party. This legal doctrine is rooted in the principles of fairness and preventing unjust harm to the third party who has acted in reliance on the apparent authority derived from the principal's representations.

For example, if a principal allows a person to present themselves as their agent and this misleading behavior induces a third party to enter into a contract or perform services, the principal cannot later deny the agency's existence if the third party was led to reasonably rely on that impression.

Other options deal with different concepts within agency law. Agency by Ratification involves a principal approving an act that was not authorized initially. Agency by Necessity applies in urgent situations where an agent must act to protect the principal's interests. Agency by Consent refers to mutual agreement to form an agency relationship. Thus, while each term has its application, Agency by Estoppel