How does estoppel apply to agency relationships?

Estoppel functions to prevent one party from contradicting claims made based on prior behavior, particularly in the context of agency relationships. When an agent acts on behalf of a principal and presents themselves in a certain capacity, the principal cannot later deny the agent's authority or the existence of the agency if that prior behavior misled others into believing in the agency relationship. This principle ensures fairness and reliance on stated actions or indications by the agent and principal.

For instance, if a principal allows an agent to represent them and communicates this representation through their actions, third parties interacting with the agent can rely on that representation. If the principal later tries to argue that there was no relationship or authority, estoppel protects the third parties from such contradictions, upholding the integrity of the transaction and the reliance on the established agency relationship.

This principle is especially relevant in real estate transactions and other business dealings, where trust and consistency in representation are crucial for smooth operations and engagements.