An agency relationship created by a principal's words or conduct that cause a third party to reasonably believe that an agency exists.

• A. Ratification
• B. Actual authority
• C. Express authority
• D. Agency by estoppel

Answer: (D)

Agency by estoppel is triggered when the principal’s words or conduct lead a third party to reasonably believe that an agency exists, and the principal is barred from denying that relationship because of the third party’s reliance. In this situation, the principal’s actions create a reasonable impression that someone is authorized to act on the principal’s behalf. Since the third party relied on that impression in entering into dealings, the principal cannot later dispute the agency relation without harming the innocent party who relied on it. This distinguishes it from actual or express authority, which come from the principal’s explicit permission or internal beliefs about what the agent can do, and from ratification, which occurs after the fact when the principal approves an act already done by someone else.