fix: resolve project variable in create_tool_instance

create_tool_instance fetched `project` only inside the auto-display-name
branch, so callers supplying display_name left it unbound and the
manifest/dockerfile/compose branches crashed with UnboundLocalError at
_get_repository_mount_name (in-container layout /home/user/{project_name}).

Resolve project unconditionally after repo validation with a not-found
guard (narrowing Project|None -> Project), and drop the now-redundant
fetch from the auto-name branch. Add a regression test covering the
manifest + display_name path.

Quality gates: ruff, mypy, pytest (74 unit tests passed)

apps/api/tests/unit/test_instance_service.py

@@ -1,5 +1,6 @@
 """Unit tests for the tool instance service."""
 
+import uuid
 from unittest.mock import MagicMock, AsyncMock
 
 import pytest
@@ -70,9 +71,7 @@ class TestGetRepositoryMountName:
 class TestStackProfileMountsWithGitMounts:
     """Tests for _stack_profile_mounts_with_git_mounts."""
 
-    def test_exact_overlap_merges_profile_files_into_git_source(
-        self, tmp_path
-    ) -> None:
+    def test_exact_overlap_merges_profile_files_into_git_source(self, tmp_path) -> None:
         """When a profile mount targets the same directory as a git mount,
         the profile files should be copied into the git-mount source so the
         container sees both sets of files through one bind mount."""
@@ -310,4 +309,100 @@ async def test_prepare_manifest_instance_uses_workspace_path_basename():
         instance_service.subprocess.run = original_run
 
     assert "WORKSPACE_NAME: acme" in compose_content
-    assert "/data/working-copies/workspace-uuid/headquarter:/home/user/acme" in compose_content
+    assert (
+        "/data/working-copies/workspace-uuid/headquarter:/home/user/acme"
+        in compose_content
+    )
+
+
+@pytest.mark.unit
+async def test_create_tool_instance_resolves_project_when_display_name_given(
+    monkeypatch, tmp_path
+):
+    """Regression: create_tool_instance must resolve `project` even when a
+    display_name is supplied.
+
+    Previously `project` was only fetched inside the auto-display-name branch,
+    so providing display_name left it unbound and the manifest/dockerfile/compose
+    branches crashed with UnboundLocalError at `_get_repository_mount_name`.
+    The mount name must derive from the project name regardless.
+    """
+    from src.schemas.tool import CreateInstanceRequest
+    from src.services.tool import instance_service
+
+    project_id = uuid.uuid4()
+    repo_id = uuid.uuid4()
+    user_id = uuid.uuid4()
+    tool_type_id = uuid.uuid4()
+    manifest_id = uuid.uuid4()
+
+    repo = MagicMock()
+    repo.project_id = project_id
+    repo.name = "src"
+    repo.path = "/data/repos/src"
+
+    project = MagicMock()
+    project.name = "My Project"  # slugifies to "my-project"
+
+    tool_type = MagicMock()
+    tool_type.id = tool_type_id
+    tool_type.name = "pi-agent"
+    tool_type.definition_type = "manifest"
+    tool_type.manifest_id = manifest_id
+    tool_type.home_directory = None
+
+    manifest_def = MagicMock()
+    manifest_def.manifest = {
+        "base_image": "ubuntu:24.04",
+        "interface_type": "terminal",
+        "user": {"name": "user", "uid": 1001, "gid": 1001},
+    }
+    manifest_def.base_definition_id = None
+
+    async def session_get(model, _obj_id):
+        name = getattr(model, "__name__", "")
+        if name == "GitRepository":
+            return repo
+        if name == "Project":
+            return project
+        if name == "ToolType":
+            return tool_type
+        if name == "ToolDefinitionManifest":
+            return manifest_def
+        return None
+
+    session = AsyncMock()
+    session.get.side_effect = session_get
+    session.add = MagicMock()
+
+    monkeypatch.setattr(
+        instance_service, "validate_config_profile", AsyncMock(return_value=None)
+    )
+    monkeypatch.setattr(
+        instance_service, "ensure_instance_directory", lambda _name: str(tmp_path)
+    )
+    monkeypatch.setattr(instance_service, "find_free_port", lambda: 12345)
+    monkeypatch.setattr(
+        instance_service, "compute_image_tag", lambda *a, **k: "img:tag"
+    )
+    compile_compose = MagicMock(return_value="services:\n  app: {}")
+    monkeypatch.setattr(instance_service, "compile_compose", compile_compose)
+    monkeypatch.setattr(instance_service, "write_compose_file", MagicMock())
+    monkeypatch.setattr(instance_service, "publish_lifecycle_event", AsyncMock())
+
+    data = CreateInstanceRequest(
+        tool_type_id=str(tool_type_id), display_name="Custom Name"
+    )
+
+    instance = await instance_service.create_tool_instance(
+        session, user_id, project_id, repo_id, data
+    )
+
+    # Must not raise UnboundLocalError; instance returned.
+    assert instance is not None
+
+    # The mount name must derive from project.name, proving `project` was
+    # resolved on the display_name path (the previous crash site).
+    variables = compile_compose.call_args.args[1]
+    assert variables["REPO_NAME"] == "my-project"
+    assert variables["WORKSPACE_NAME"] == "my-project"