An agency relationship created when one party adopts a contract entered into on his behalf by another who acted without authority at the time is legally known as an agency by estoppel.

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An agency relationship created in this manner is known as an agency by ratification, not estoppel. Agency by estoppel occurs when a principal's actions lead a third party to believe that an agent has authority, even if the agent does not.

An Agency Relationship Created When One Party Adopts a Contract