Agency by Estoppel

Agency by estoppel occurs when a person (the principal) leads others to believe someone (the agent) has authority to act on their behalf, even if no formal agreement exists. If a third party reasonably relies on that belief and suffers a loss as a result, the principal may be prevented (“estopped”) from denying the agency. Essentially, it holds the principal accountable for actions or representations that made others think an agent had authority, preventing them from denying the agency to protect honest third parties who trusted that belief.