Which concept binds the principal when a third party detrimentally relies on a belief about the agent's authority that the principal caused or did not correct?

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Study for the Legal Cases on Agency, Fiduciary Duty, and Corporate Governance Test. Use flashcards and multiple choice questions, each with hints and explanations. Prepare effectively for your exam!

Multiple Choice

Which concept binds the principal when a third party detrimentally relies on a belief about the agent's authority that the principal caused or did not correct?

Estoppel in agency law. When the principal makes or fails to correct a representation that leads a third party to reasonably believe the agent has authority, and the third party relies on that belief to their detriment, the principal is barred from denying the agent’s authority. This protects the third party from being misled by the principal’s own actions or omissions. The other concepts don’t fit this exact situation: actual authority is about what the agent is truly authorized to do, agency is the overall relationship, and the duty of loyalty concerns the agent’s fiduciary duties—not the principal’s obligation to honor a third party’s reliance on perceived authority.

Which concept binds the principal when a third party detrimentally relies on a belief about the agent's authority that the principal caused or did not correct?

Study for the Legal Cases on Agency, Fiduciary Duty, and Corporate Governance Test. Use flashcards and multiple choice questions, each with hints and explanations. Prepare effectively for your exam!

Which concept binds the principal when a third party detrimentally relies on a belief about the agent's authority that the principal caused or did not correct?

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