California Real Estate SalespersonLaws of Agency and Fiduciary DutiesMedium
A property owner allows an unlicensed friend to sit at the closing table, sign documents, and negotiate terms on several occasions without objection, even though no written agency agreement exists. A buyer relies on the friend's apparent authority and later sues when a promise made by the friend is not honored. What legal theory would most likely bind the owner to the friend's representations?
- AExpress agency
- BImplied agency by conduct of the agent alone
- CAgency by ratification
- DOstensible agency (agency by estoppel)
Show answer & explanationAnswer & explanation
Correct answer: D. Ostensible agency (agency by estoppel)
Ostensible agency arises when a principal's conduct causes a third party to reasonably believe someone is authorized to act as their agent, even without an actual agreement. Because the owner's repeated conduct led the buyer to reasonably rely on the friend's apparent authority, the owner may be estopped from denying the agency relationship.
Why the other options are wrong
- A. Incorrect; there was no actual written or oral agreement establishing express agency.
- B. Incorrect; implied agency arises from the principal's conduct toward the agent, but ostensible agency specifically addresses third-party reliance.
- C. Incorrect; ratification applies when the principal later approves an unauthorized act, not ongoing reliance on apparent authority.
Ostensible Agency (Estoppel)
An agency created when a principal's actions cause a third party to reasonably believe another person has authority to act on the principal's behalf, even absent an actual agreement.
- Based on principal's conduct, not an actual agreement.
- Protects third parties who reasonably rely on apparent authority.
- Also called 'agency by estoppel.'
Memory trick: If it looks like an agent and the owner lets it look that way, the owner is stuck.