Define: Agency By Estoppel

Agency By Estoppel
Agency By Estoppel
Quick Summary of Agency By Estoppel

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.

What is the dictionary definition of Agency By Estoppel?
Dictionary Definition of Agency By Estoppel

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.

Full Definition Of Agency By Estoppel

The concept of agency by estoppel arises where 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 that may arise where, in fact, no formal agency agreement is in effect. A principal may give an 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 FAQ'S

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.

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Definition Sources

Definitions for Agency By Estoppel are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 11th March, 2024.

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