Agency by estoppel is described as...

• A. Apparent authority arises from the third party's belief.
• B. Estoppel requires the agent to have actual authority.
• C. Estoppel requires formal contract.
• D. Agency by estoppel is created when the principal's action leads a third party to believe an agency exists.

Answer: (C)

Agency by estoppel happens when the principal’s actions lead a third party to believe that an agency exists, and the principal cannot later deny that belief because it protected the third party’s reliance. Crucially, the agent does not need actual authority for estoppel to apply, and no formal contract is required. This is why the description that fits best is the one stating that the principal’s action creates the belief in an agency. The idea that a formal contract is required is incorrect, and while apparent authority also involves the third party’s belief, it centers on the principal’s representations rather than the mere belief itself.