Which statement best reflects agency by estoppel?

• A. The agent has express authority from the principal to act on behalf of the principal.
• B. The agent's unauthorized contract is voidable by the principal.
• C. The principal's actions cause a third party to reasonably believe an agency exists, and the principal is barred from denying it.
• D. The principal terminates the agency upon death, ending all authority.

Answer: (C)

Agency by estoppel happens when the principal’s conduct or representations lead a third party to reasonably believe there is an agency, and the principal is then barred from denying that agency to that third party. The crucial idea is that the appearance of authority created by the principal’s actions protects the third party who relied on that appearance; the principal cannot turn around and say there is no agency when the third party has acted in reliance on that belief.

This option best captures that dynamic: the principal’s actions create the reasonable belief in an agency, and the principal is prevented from denying it as to the third party who trusted that belief. It’s different from actual authority, which arises from express or implied permissions given directly by the principal to the agent, rather than from the principal’s conduct toward a third party. It’s also different from a situation where an unauthorized contract could be void or voidable, which concerns the agent acting without authority. And it’s not about death terminating authority—the focus here is on preventing denial of an agency that a third party reasonably thought existed.