Which term describes a situation where a principal's actions lead a third party to believe someone is an agent when they are not?

The term that describes a situation where a principal's actions lead a third party to believe someone is an agent when they are not is known as estoppel. Estoppel occurs when a principal, through their conduct, creates an impression or representation about the agent's authority that a third party relies upon. This means that even if the person is not officially authorized to act as an agent, the principal cannot later deny that the person had authority because the third party relied on the principal's behavior.

For example, if a business owner allows an employee to act in a capacity that suggests they have the authority to make decisions on behalf of the business, and a third party engages with this employee believing them to be an agent, the business owner may be estopped from claiming that the employee does not have such authority because the third party was led to believe otherwise due to the owner's actions.

In contrast, ratification involves a situation where a principal accepts the actions of someone acting without authority, thereby retroactively granting authority to that person. Agency by agreement pertains to the creation of an agency relationship through a contract or mutual agreement between the parties involved. Operation of law refers to circumstances in which an agency relationship is created by law rather than by agreement or conduct. Each of these