Chapter 2-Law of Agency 1

Question 1

Accountability

Answer 1

In an agency relationship, the agent’s fiduciary duty to account to the principal.

Question 2

Actual Fraud

Answer 2

Intentional misrepresentation or concealment of a material fact; when a person actively conceals material information or makes statements known to be false or misleading. Also called deceit.

Question 3

Agency

Answer 3

Relationship of trust created when one person (principal) gives another person (agent) the right to represent the principal in dealings with third parties.

Question 4

Agency Relationship

Answer 4

The representation of a party in a real estate transaction.

Question 5

Broker’s Agent

Answer 5

Engaged and works directly for the broker-a broker’s agent is not a subagent of the seller or buyer. Still owes the same fiduciary duty to the broker’s seller or buyer as the broker does.

Question 6

Buyer Broker Contract

Answer 6

A written agency contract between a buyer and a real estate broker stipulating the broker will be paid a commission when the buyer purchases real estate.

Question 7

Buyer’s agency

Answer 7

Represents and owes all loyalty to the buyer in a real estate transaction.

Question 8

Client

Answer 8

Person who employs a broker, lawyer, or other professional. Real estate clients can be sellers, buyers, or both.

Question 9

Confidentiality

Answer 9

Any information learned during the course of the agency relationship can never be revealed or used later against the principal, even after the transaction is closed

Question 10

Constructive Fraud

Answer 10

A negligent misrepresentation or concealment of a material fact; when a person carelessly fails to disclose material information, or makes false or misleading statements. Also called Negligent Misrepresentation

Question 11

Customer

Answer 11

A party in a transaction to whom an agent does not have a fiduciary duty or relationship, but to whom an agent must be fair and honest.

Question 12

Designated Agency

Answer 12

When two licensees within a single brokerage represent their individual clients fully.

Question 13

Disclosures

Answer 13

Points or facts in a real estate transaction that must be revealed.

Question 14

Dual Agency

Answer 14

Occurs when a broker or a salesperson represents both parties (buyer and seller) in a transaction; most states require written consent from both parties before this can occur.

Question 15

Estoppel

Answer 15

Legal doctrine that prevents a person from asserting rights or facts inconsistent with earlier actions or statements.

Question 16

Expressed agency

Answer 16

Agency relationship based on an expressed agreement, either written or oral.

Question 17

Fiduciary

Answer 17

Person in a position of trust, held by law to high standards of good faith and loyalty.

Question 18

Fiduciary Duties

Answer 18

What is owed to all clients in an agency relationship-obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care.

Question 19

Fiduciary Relationship

Answer 19

A relationship of trust and confidence, in which one party owes the other (or both parties owe each other) loyalty and a higher standard of good faith than is owed to third parties.

Question 20

Fraud

Answer 20

Intentional or negligent misrepresentation or concealment of a material fact; making statements that a person knows, or should realize, are false or misleading.

Question 21

General Agent

Answer 21

A person authorized to handle a principal’s affairs in one area or in specified areas

Question 22

Implied Agency

Answer 22

Agency relationship created through the behavior (actions or words) of one or both parties.

Question 23

Listing agreement

Answer 23

A written agency contract between a seller and a real estate broker, stating the broker will be paid a commission for finding (or attempting to find) a buyer for the seller’s real property.

Question 24

Loyalty

Answer 24

An agent must put the principal’s interests above all others’, including the agent’s own.

Question 25

Meeting of the Minds

Answer 25

Occurs when the parties agree on price, down payment, financing method and other essential terms.

Question 26

Misrepresentation

Answer 26

A false or misleading statement.

Question 27

Negligence

Answer 27

Conduct that falls below the standard of care a reasonable person would exercise under the circumstances; an unintentional breach of legal duty resulting from carelessness, recklessness, or incompetence.

Question 28

Obedience

Answer 28

An agent must follow the legal instructions of the principal, obey the parameters of the agency relationship, and not stray beyond the scope of authority.

Question 29

Ostensible Agency

Answer 29

Occurs when an agent is perceived as the principal’s fiduciary by a third party and the principal does not declare otherwise.

Question 30

Principal

Answer 30

1. A person who grants another person (an agent) authority to represent him or her in dealings with third parties. 2. One of the parties to a transaction (such as buyer or seller), as opposed to those who are involved as agents or employees (such as a broker or escrow agent). 3. With regard to a loan, the amount originally borrowed, as opposed to the interest.

Question 31

Puffing

Answer 31

Superlative statements about the quality of a property that should not be considered assertions of fact.

Question 32

Ratification

Answer 32

Confirmation or approval of an act not authorized when it was performed.

Question 33

Renunciation

Answer 33

When someone who has been granted something later gives it up or rejects it; as when an agent withdraws from the agency relationship.

Question 34

Revocation

Answer 34

When someone who granted or offered something withdraws it, as when a principal withdraws the authority granted to the agent, an offeror withdraws the offer.

Question 35

Self-Dealing

Answer 35

When a real estate agent buy’s the principal’s property (or sells it to a relative, friend etc. or to a business the agent has an interested in), without disclosing that fact to principal, then sells it for a profit.

Question 36

Seller’s agent

Answer 36

The agent who is representing only the seller in a transaction an owes all loyalty to that seller/client.

Question 37

Special Agent

Answer 37

An agent with limited authority to act on behalf of the principal.

Question 38

Subagent

Answer 38

An agent of an agent; a person that an agent has delegated authority, so the subagent can assist in carrying out the principal’s orders.

Question 39

Undisclosed Dual Agency

Answer 39

Occurs when both principal parties in the same transaction are represented by a fiduciary without full disclosure to and approval from all parties in the transaction.

Question 40

Undivided loyalty

Answer 40

This is given up by the buyer and seller when they consent to dual agency.

Question 41

Universal Agent

Answer 41

An agent authorized to do everything that can be lawfully delegated to a representative.

Question 42

Vicarious Liability

Answer 42

When one person is responsible for the actions of another.