If a principal agrees to be bound by the actions of an agent who has acted outside the terms of the agency agreement, what type of agency has been created?

When a principal agrees to be bound by the actions of an agent who has acted beyond the scope of the agency agreement, this scenario exemplifies agency by ratification. Ratification occurs when the principal, after the fact, approves or affirms the unauthorized actions taken by the agent, thereby making those actions legally binding as if they had been authorized from the beginning.

This principle emphasizes the idea that a principal can choose to accept the benefits and liabilities of the agent's actions even if those actions exceeded the original authority granted in the agency agreement. This process creates a formal acknowledgment of the agent's actions, transforming them into legitimate acts of the agency.

In contrast, the other types of agency mentioned do not pertain to approval after the fact. Agency by apparent authority involves situations where a third party believes an agent has the authority to act based on the principal's representations, but it does not require the principal's subsequent approval of the agent's actions. Agency by consent refers to the initial agreement between the principal and agent to create the agency relationship, while agency by necessity pertains to situations where an agent must act to preserve the interests of the principal in emergencies without prior consent.