What does it mean when a principal does not stop someone from representing their interests, thereby creating an agency relationship?

The situation described involves an agency relationship established when a principal does not take steps to stop someone from acting on their behalf. This scenario is referred to as agency by estoppel. In this context, the principal's failure to act creates a perception for third parties that the individual has the authority to represent the principal's interests, leading to reliance on that representation.

Agency by estoppel arises primarily from the conduct of the principal, which allows others to assume the existence of an agency relationship even if it was not explicitly established. It serves to protect third parties who may rely on the actions of the agent, believing they have the right to act on behalf of the principal. This type of agency emphasizes the importance of the principal's conduct and communication, as inaction can lead to unintended legal consequences.

While apparent authority involves a similar concept, it specifically pertains to the authority that a third party perceives based on the principal's actions, rather than the principal's failure to object. Express agency involves a clear agreement between the principal and agent, and implied agency is created through the conduct of parties rather than explicit authority. Thus, agency by estoppel most accurately describes the situation where a principal's inaction leads to the creation of an agency relationship.