Agency by estoppel is a legal concept that arises when a principal, through their actions or words, leads others to believe that an individual is their agent, and a third party relies on that belief to their detriment. Even if no formal agency agreement exists between the principal and the purported agent, the principle of estoppel prevents the principal from denying the existence of the agency relationship and holds them liable for the actions of the agent. This legal doctrine is based on fairness and prevents principals from unfairly disavowing the authority of individuals they have implicitly held out as their agents.
The liability of a principal for all contracts entered into on his behalf by an agent acting within his apparent or ostensible authority is universally recognised.
Agency by estoppel is a legal concept that arises when a person or entity (the principal) leads another person or entity (the third party) to believe that a third person (the agent) has the authority to act on their behalf, even though no formal agency relationship exists. In this situation, the principal is “estopped” or prevented from denying the agent’s authority, and the third party can hold the principal liable for the agent’s actions. This concept is based on the principle of fairness and is intended to protect innocent third parties who reasonably rely on the representations made by the principal.
Agency by estoppel is a legal principle that allows a person to be held liable for the actions of another person if they have given the impression that the other person has the authority to act on their behalf. This principle is based on the idea that if someone allows another person to act as their agent, even if they have not explicitly given them authority, they should be held responsible for any actions taken by that person. In order for agency by estoppel to apply, there must be a representation by the principal that the agent has authority, reliance by a third party on that representation, and harm caused to the third party as a result of that reliance.
The concept of agency by estoppel arises when one person acts in such a way that the other believes that a third person is authorised to act on his behalf and enters into a transaction with the third person. The person whose act induced him to do so is liable for that agreement as if the third person acted on his behalf.
A legally binding agency relationship may arise where, in fact, no formal agency agreement is in effect. A principal may give the appearance of an agency relationship by, for example, furnishing his or her firm’s call cards or other stationery to the agent. In such cases, the existence of an agency may be presumed, and the principal may be bound by the acts of the agent performed on the principal’s behalf. Also sometimes referred to as presumption of agency.
Agency by estoppel is a legal principle that arises when a person (the principal) leads another party (the third party) to believe that someone else (the agent) has the authority to act on their behalf. If the third party reasonably relies on this representation and suffers harm as a result, the principal may be estopped, or prevented, from denying the agent’s authority.
Agency by estoppel is typically established through the following elements:
- Representation: The principal must represent, either expressly or impliedly, that the agent has authority to act on their behalf.
- Reliance: The third party must reasonably rely on the representation of the principal.
- Detriment: The third party must suffer harm or incur some form of detriment as a result of their reliance on the representation.
Representations can be made through words, actions, or conduct. For example, if a principal allows an individual to hold themselves out as their agent by providing them with business cards or uniforms with the principal’s logo, this may create a representation of authority.
Yes, agency by estoppel can exist even if the agent does not have actual authority to act on behalf of the principal. It is based on the principle of fairness and preventing injustice to third parties who reasonably rely on the representation of authority.
- A company allows an employee to represent themselves as a manager and enter into contracts with clients. Even if the employee does not have actual authority to act as a manager, the company may be estopped from denying the employee’s authority if clients reasonably rely on their representation.
- A landlord informs a tenant that their property manager has authority to collect rent on their behalf. If the tenant pays rent to the property manager based on this representation, the landlord may be estopped from denying the property manager’s authority.
Agency by estoppel may be revoked if the conditions that gave rise to the estoppel are no longer present. For example, if the principal informs the third party that the agent’s authority has been revoked and the third party is made aware of this change, the estoppel may no longer apply.
Agency by estoppel is based on the reliance of a third party on the representation of authority, whereas actual authority arises from a direct grant of authority by the principal to the agent. While actual authority is based on the intent of the parties, agency by estoppel focuses on the fairness and protection of third parties who reasonably rely on representations made by the principal.
Frequently Asked Questions about Agency By Estoppel: Q: What is agency by estoppel? A: Agency by estoppel is a legal doctrine that allows a person to be treated as an agent of another party, even if they do not have a formal agency relationship, based on the actions or representations of the alleged principal. Q: How does agency by estoppel work? A: Agency by estoppel arises when a person (the alleged principal) leads another party (the third party) to believe that someone else (the alleged agent) has the authority to act on their behalf. If the third party relies on this belief and enters into a transaction with the alleged agent, the alleged principal may be bound by the actions of the alleged agent. Q: What are the requirements for agency by estoppel? A: To establish agency by estoppel, three elements must be present: (1) the alleged principal must make a representation or engage in conduct that leads the third party to believe that the alleged agent has authority to act on their behalf, (2) the third party must reasonably rely on this belief and enter into a transaction with the alleged agent, and (3) the third party must suffer harm or loss as a result of their reliance. Q: Can agency by estoppel be created unintentionally? A: Yes, agency by estoppel can be created unintentionally. It can arise from the actions or representations of the alleged principal, even if they did not intend to create an agency relationship. Q: Can agency by estoppel be used as a defence? A: Yes, a third party who relied on the alleged principal’s representation of authority may use agency by estoppel as a defence. If the alleged principal denies the existence of an agency relationship, the third party can argue that they should be bound by the actions of the alleged agent based on the doctrine of agency by estoppel. Q: What is the significance of agency by estoppel? A: Agency by estoppel is significant because it protects the interests of third parties who reasonably rely on the representations of authority made by alleged principals. It ensures that those who hold themselves out as having authority to act on behalf of others cannot later deny that authority to the detriment of innocent third parties.
DismissThis site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 9th April 2024.
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