What does the doctrine of estoppel prevent a principal from doing?

The doctrine of estoppel plays a significant role in agency law by preventing a principal from denying or denying the existence of an agency relationship if they have previously acted in a way that would lead a third party to believe that such a relationship exists. Essentially, this legal principle protects the reasonable expectations of third parties who have relied on the principal's representation of the agency.

In practical terms, if a principal has allowed an agent to act on their behalf and has not clearly communicated any limitations or the termination of that relationship to other parties, the principal may be estopped from later claiming that no agency relationship existed. This ensures that the agent's actions, which were deemed to be authorized, remain valid as they relate to third parties. It's about preventing unfair outcomes for those who have acted based on the assumption that the agency was legitimate.

By contrast, the other options focus on specific actions regarding the relationship and compensation that don’t encapsulate the full intent of estoppel, such as changing agreement terms or revoking authority, which can be done under certain circumstances without invoking estoppel if the proper communications are made. The focus on denying the existence of an agency relationship encapsulates the core function of the doctrine.