Agency Relationships and Contracts Flashcards
What is a General Agent?
When the Principal (Client) delegates a broad range of all things in a particular manner and the relationship is expected to be ongoing
What is a Special/Limited Agent?
When the Principal (client) delegates a specific act or business transaction for a specific time
What is a Universal Agent?
A party is given full power of attorney to represent another person. Ex: A guardian of a minor or incompetent person.
What is Single Agency?
When a broker is representing the seller or the buyer in the transaction, but not both.
What is Dual Agency?
When an agent represents 2 principals (clients) in the same transaction.
What is a Facilitator or Transaction Broker?
One who does not represent either party in a transaction. Both parties are treated as customers in the transaction.
What is Designated Agency?
Both, buyer and seller are represented by the same brokerage firm but different agents within the firm. This can occur only with the written permission from both parties. Both parties are clients.
** NEED TO KNOW **
A payment of compensation or its source does not create the agency relationship. A contract or the actions of the parties, creates the agency relationship.
What represents the fiduciary duties of the agent to the principal?
The agent must act with Care, Obedience, Loyalty, Disclosure, Accounting, and Confidentiality.
What is Care?
Doing what you can do to protect client and help reach their goal.
Seller as client - Establish the correct list price, properly representing the property, delivering appropriate forms and documents needed in the transaction, and properly marketing the property.
Buyer as client - Helping find suitable property, negotiating the offer, and directing the buyer to a lender and other experts for inspections and advice.
What is Obedience?
Agent must act in good faith and obey the principals instructions given in the contract.
What is Loyalty?
Agent must be loyal, putting the principals interest above those of all others.
What is Disclosure?
The agent must keep the principal informed, disclosing all facts and information that could affect the transaction. If representing a seller, the agent must disclose if the buyer is willing to offer more for the property. If representing a buyer, an agent needs to disclose all defects and if the seller would take less for the property.
What is Accountability/Accounting?
Agent is accountable for all funds or property of others that come into the agents possession. You owe accountability to everyone including customers.
What is Confidentiality?
Agent must not share to anyone - anything that is confidential to the principal. You must protect your current and past clients even if you are no longer representing them.
** NEED TO KNOW **
Agents must use reasonable care and skill in performance, be honest, and disclose facts that materially affect the value of the property, regardless of whom they are representing.
** NEED TO KNOW **
Where a agent breaches a fiduciary duty to the principal, the agent will not be entitled to a commission and may not be additionally liable for actual damages.
What is a Ministerial Act?
Those acts that a licensee may perform for a consumer that are informative in nature and do not rise to the level of active representation.
What is Puffing?
The exaggeration of a fact.
Termination and Remedies for Nonperformance
All agreements should state the grounds for termination and remedies for nonperformance. The principal may peruse damages through civil action or file a complaint with the real estate commission.
Disclosure (Representation)
Generally, the agency disclosure statement must be in writing. The purpose is to make sure buyers and sellers understand whether they are customers or clients in a transaction. Agency disclosure usually occurs before confidential information is given. A licensee must always disclose that he/she has a real estate license when purchasing or leasing property.
What is a Unilateral Contract?
Only one party is obligated to perform in a unilateral contract.
What is a Bilateral Contract?
Both parties are obligated to perform in a bilateral contract.
What is an Express Contract?
The parties have specifically agreed, either orally or in writing, to enter into a contract.
What is an Implied Contract?
The parties by their actions or conduct enter into s contract. Ex. ordering food in a restaurant, securing the services of a taxi, or buying gasoline at a self serve pump.
When is a Contract Valid?
When it meets all the essential elements and is an enforceable contact.
What is the essential elements of a valid contract?
The parties must be legally and mentally competent
There must be an Offer and Acceptance
Contract must be in Legal Form
Contract must be entered into for Legal Purpose
There must be Legal Consideration (promise, something of value, made by one party to induce another party to enter into a contract)
There must be Reality of Consent (no tricking or enforcing someone to enter a contract)
Contracts that are required to be written - there must be signatures of the buyer and seller authorized to perform
What is a Void Contract?
A contract that is missing an essential element and has no legal force and effect. (i.e., the contract was not signed by the person with the authority to perform)
What is a Voidable Contract?
It may be rescinded by one or both parties. Contracts are voidable by the innocent party if entered under duress, under the influence, through misrepresentation, through fraud, or with an incompetent person. A contract with a contingency that cannot be met may be voidable.
What is an Unenforceable Contract?
When neither party can sue the other to force performance.
What is Notice of Delivery/Acceptance?
An offer is not a contract; an offer must be accepted to create a contract. Acceptance must be unconditional, unambiguous, and in strict conformance with the offer. There cant be any changes in any of the terms or the offer. An important part of the acceptance involves its communication to the offeror.
When is the Acceptance/Delivery of an offer effective?
The acceptance of the offer is effective until the offeror receives notice of the acceptance: this is often called delivery.
What is a counteroffer?
A counter offer can be a conditional acceptance. Its a rejection coupled with a new offer.
What is an Executory Contract?
One or both parties have duties to perform. A sales contract is executory because the buyer must financially qualify, and the seller must produce a marketable title. Most contracts are Executory Contracts.
What is an Executed Contract?
All parties have fulfilled their duties and responsibilities in an executed contract. The sales contract becomes fully executed at closing when the deed has been conveyed and the buyer has paid the purchase price.
When is a contract Enoforceable?
The contract must meet the state laws for the creation of that particular type of contract for it to be enforceable (deed, will, note, mortgage, etc.).
When can a Suit for Specific Performance be filed?
If the buyer or seller defaults after a sales contract is created and the contingencies are met, the sales contract is enforceable and they are able to file to enforce the terms of the contract.
What do the Statue of Frauds Require?
The Statute of Frauds requires that certain instruments, such as deeds, real estate sale contracts, and certain leases, be in writing in order to be be legally enforceable.
How would one add or change the provisions in a contract?
The parties should create an addendum or supplement to the contract.
