Which term describes an agency created by law after the existence of an ostensible agency?

Study for the Aceable Agent Finance Test. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

Agency by estoppel is created by law when a principal’s actions lead a third party to believe someone is acting as their agent, and the principal cannot later deny that relationship. When ostensible (apparent) agency exists, the principal’s conduct makes the third party reasonably rely on the agent’s authority. Because the reliance was legitimate, the law treats the agency as having been formed by estoppel, binding the principal to the agent’s actions even without a formal agreement. This protects the third party from being misled by the principal’s representations. The other terms describe different concepts—an executory contract is a pending contract, a contract for deed is seller financing, and a deed of trust is a security instrument—none describe a legally created agency arising from ostensible agency.