Which term describes an agency relationship created by the actions of the parties?

• A. Express agency
• B. Implied agency
• C. Ostensible agency
• D. Agency by necessity

Answer: (B)

Implied agency occurs when the agency relationship is formed by the conduct of the parties rather than a formal contract. When the principal acts in a way that shows they intend to appoint someone to handle dealings, and the agent begins performing duties and the parties benefit from those actions, the law infers an agency relationship even without a written or spoken agreement. This relies on what the parties do and how that conduct signals consent and authority.

This differs from express agency, where there is a clear, explicit agreement to designate an agent, usually in writing. Ostensible agency (agency by estoppel) centers on how a principal’s actions lead a third party to believe an agency exists and can create liability if the principal’s behavior misleads that third party. Agency by necessity arises only in emergencies when off-site action is required to protect the principal’s interests.