In an agency relationship, which party is the one who authorizes the agent to act on the principal's behalf?

• A. Agency by estoppel
• B. Principal
• C. Agent
• D. Power of attorney

Answer: (B)

The principal is the one who authorizes the agent to act on their behalf. In an agency relationship, the principal hires or directs the agent and grants them authority—whether expressly, implicitly, or through conduct that leads others to rely on the agent. A power of attorney is just a tool the principal can use to formalize that authority, but the authorization comes from the principal, not from the agent. Agency by estoppel describes a situation where third parties are misled into thinking there is an agency due to the principal’s actions, not a separate authorization coming from the agent. So the party directly authorizing the agent is the principal.