Agency by Estoppel
Definition
An agency relationship created when a principal's actions or words lead a third party to reasonably believe that an agent has authority, and the principal fails to correct this belief.
Example
A broker introduces his assistant as "my associate who handles all my sales." A buyer works with the assistant believing she is an authorized agent. Even if the assistant had no formal authority, the broker is estopped from denying the agency because his words created the appearance of authority.
Exam Tip
Agency by estoppel is created by the PRINCIPAL's conduct, not the agent's. The principal fails to correct a false impression. Compare with agency by ratification (principal approves unauthorized acts after the fact).
Related Agency Terms
Agency Relationship
A legal relationship in which one person (the agent) is authorized to act on behalf of another person (the principal) in business transactions with third parties.
Fiduciary Duty
The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.
Dual Agency
A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.
Designated Agency
An arrangement where a brokerage assigns separate agents within the firm to represent the buyer and seller in the same transaction, allowing each client to have dedicated representation.
Transaction Brokerage
A non-agency relationship where the broker facilitates a real estate transaction without representing either party, owing limited duties of honesty, fairness, and competence to both.
Agency by Ratification
An agency relationship created when a principal approves or accepts an agent's previously unauthorized actions, effectively granting authority after the fact.
Frequently Asked Questions
Test Your Agency Knowledge
Practice with exam-style questions to make sure you can apply Agency by Estoppel and other agency concepts.