What term describes a situation where a third party's belief about an agent's authority arises from the principal's conduct, regardless of actual authority?

What term describes a situation where a third party's belief about an agent's authority arises from the principal's conduct, regardless of actual authority?

• A. Agency by Ratification
• B. Ostensible Agency
• C. Express Authority
• D. Implied Authority

Answer: (B)

Ostensible agency occurs when a third party reasonably believes an agent has authority because the principal’s conduct created that impression, even if the agent lacks actual authority. The key idea is that the belief comes from how the principal acts (or fails to correct misrepresentations), not from any explicit grant of power. For example, if a principal allows a salesperson to sign contracts on the owner’s behalf and never corrects the impression that the salesperson can bind the owner, a buyer can reasonably rely on that appearance of authority and proceed accordingly. This differs from express authority (clearly granted in words or writing), implied authority (inferred from the agent’s role and duties, still rooted in actual authority), and agency by ratification (the principal approves a sale after the fact, establishing authority post hoc).

Ostensible agency occurs when a third party reasonably believes an agent has authority because the principal’s conduct created that impression, even if the agent lacks actual authority. The key idea is that the belief comes from how the principal acts (or fails to correct misrepresentations), not from any explicit grant of power. For example, if a principal allows a salesperson to sign contracts on the owner’s behalf and never corrects the impression that the salesperson can bind the owner, a buyer can reasonably rely on that appearance of authority and proceed accordingly. This differs from express authority (clearly granted in words or writing), implied authority (inferred from the agent’s role and duties, still rooted in actual authority), and agency by ratification (the principal approves a sale after the fact, establishing authority post hoc).