Multiple choice Agency by conduct arises when a person knowingly permits another to act on his or her behalf when a contract is entered to allow the agent to act in a certain manner when a contract is negotiated with a third party when a principal makes it clear that an agent does not have authority to act on their behalf Reveal answer Fill a bubble to check yourself A Correct answer Explanation (1) Agency by conduct arises when a person knowingly permits another to act on his or her behalf.