What term describes a situation where a principal allows a license holder to act in a way that leads a third party to believe the license holder is the principal's agent?

What term describes a situation where a principal allows a license holder to act in a way that leads a third party to believe the license holder is the principal's agent?

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

Answer: (A)

Ostensible agency is when a principal’s actions create the appearance to a third party that the license holder is acting as the principal’s agent. Because the third party reasonably relies on that appearance, the principal can be bound by the licensee’s actions even without a formal agreement or explicit authorization. In real estate practice, if the principal presents, represents, or otherwise allows the licensee to act as though they’re the agent, the principal must stand by the licensee’s dealings with buyers or sellers who believe there is an agency relationship. This is why the licensee’s authority is treated as if it existed in the eyes of the third party, even though it may not have been formally granted. Express authority would require explicit permission; implied authority arises from the agent’s role and typical actions, not from creating the appearance of agency for a third party. Ostensible agency (agency by estoppel) and the appearance it creates are the key ideas here.

Ostensible agency is when a principal’s actions create the appearance to a third party that the license holder is acting as the principal’s agent. Because the third party reasonably relies on that appearance, the principal can be bound by the licensee’s actions even without a formal agreement or explicit authorization. In real estate practice, if the principal presents, represents, or otherwise allows the licensee to act as though they’re the agent, the principal must stand by the licensee’s dealings with buyers or sellers who believe there is an agency relationship. This is why the licensee’s authority is treated as if it existed in the eyes of the third party, even though it may not have been formally granted. Express authority would require explicit permission; implied authority arises from the agent’s role and typical actions, not from creating the appearance of agency for a third party. Ostensible agency (agency by estoppel) and the appearance it creates are the key ideas here.