LAW OF AGENCY VOCABULARY Flashcards
Abatement
A reduction, a decrease, or a diminution. The suspension or cessation, in whole or in part, of a continuing charge, such as rent.
Accounting
In the context of agency law, _________ refers to both the process and the result of providing accurate and complete records of all funds received and expended by the agent or fiduciary on behalf of the principal or beneficiary of the relationship.
Actual Damages
Monetary damages or losses suffered by someone due to actions or failures to act by another. These damages compensate for actual losses suffered. Distinguished from punitive damages, which are meant to punish the wrongdoer.
Agency by Estoppel
A relationship that results when the principal’s actions make it unfair to deny the existence of agency authority. Example: If you appear to have authority to sell my car and someone relies on that, I may be prevented from denying the transaction.
Agency by Ratification
A situation where the principal approves (ratifies) the agent’s actions after the fact, creating agency retroactively. Example: If I buy a horse on your behalf without authorization, but you later complete the payment, you have ratified my action.
Agency Coupled with an Interest
An agency where the agent holds an interest in the property they represent. Example: A partner in a real estate group listing a jointly owned property.
Agent
A person empowered to act on behalf of a principal. An independent contractor works under a flexible agreement with an employer, but distinguishing between employees and contractors is important.
Apparent Authority
Authority that arises when a principal gives the impression that an agent has authority, and a third party relies on that. Example: Providing a worker with a company truck and tools may make them appear authorized to make deals on behalf of the company.
Arbitration
The process of submitting a dispute to an impartial decision-maker. It may be binding or non-binding, depending on the parties’ agreement.
Associated Licensees
Licensees in a general agency relationship with their supervising brokers, having authority to act in the broker’s name in real estate transactions.
Authority
The legal power to perform duties or obligations inherent in a job or position. Example: A police officer has legal authority in law enforcement but not in other areas.
Buyer Broker
A licensed real estate broker representing the interests of the buyer rather than the seller in a transaction.
Claims Made
A type of insurance covering claims made during a specific period, regardless of when the underlying event occurred.
Client
The person who employs an agent or broker to perform a service for a fee, also called a principal.
Commingling
The improper mixing of clients’ or customers’ funds with an agent’s funds. This is especially problematic in financial, legal, and real estate contexts.
Common Law
Also known as case law. It is a collection of judicial decisions that establish legal principles based on past rulings. Court decisions set precedent unless overturned by legislation or a higher court.
Confidentiality
The obligation to keep certain information private. In real estate, agents must maintain confidentiality about buyers, sellers, and property details.
Consanguinity
Relationship by blood or a common ancestor. It signifies a close connection or affinity.
Contractual Privity
The legal relationship between two contracting parties.
Customer
In agency law, an unrepresented third party in an agency relationship.
Disability
A mental or physical condition that renders someone incapable of acting for themselves. Example: A person in a coma or with a severe stroke may be legally disabled.
Disclosure
The obligation of an agent to reveal relevant information to a principal and to disclose specific facts to potential real estate buyers.
DTPA (Deceptive Trade Practices Act)
A Texas law that protects consumers from deceptive or unethical business practices.
Dual Agency
When a single agent represents multiple parties in a transaction, either intentionally or by law. Dual agency is not permitted in Texas.
Durable Power of Attorney
Powers of attorney normally terminate if the principal is incapacitated. The durable power of attorney specifically does not terminate on incapacity, allowing the agent to continue acting on behalf of the principal. It terminates upon the principal’s death.
Earnest Money
Deposit paid with an offer as a good faith gesture by the buyer. Although not consideration in a contract, a higher earnest money deposit often indicates a more serious buyer intent. If agreed upon, earnest money may be treated as liquidated damages if the buyer defaults.
EEOC
Acronym for the Equal Employment Opportunity Commission, a federal agency.
Employment at Will
A common-law concept stating that an employer has the right to hire or fire employees without cause.
Escrow Agent
A person or entity that holds money or legal documents as a neutral third party. In real estate, an __________ (often a title company) holds earnest money, deeds, and other documents until all contract requirements are met. The agent then disburses funds and transfers documents for recording.
Exclusive Authority to Purchase
Also known as a buyer representation or buyer broker agreement, this is a contract employing a broker to find and negotiate a property purchase for the principal.
Exclusive Right-to-Sell Listing
A listing agreement guaranteeing the broker a commission regardless of who sells the property. Also called an Exclusive Seller Agency Listing.
Exemplary Damages
Also known as punitive damages, these are awarded in addition to actual damages to punish a party for wrongdoing and deter future misconduct.
Express Authority
Specific, explicitly stated authority granted to perform defined tasks. Distinguished from implied authority.
Fair Labor Standards Act (FLSA)
Establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for employees in the private sector and government.
Faithful Performance
An agent’s obligation to obey all legal instructions given by the principal in a principal-agent relationship.
Fiduciary Relationship
A relationship where one party is in a position of trust and responsibility, such as an attorney-client or broker-client relationship.
Fiduciary
A person in a position of trust and confidence, such as a broker for a client or a trustee.
Fraud
Intentional misrepresentation or omission of a material fact to deceive someone, leading to damages or loss. Fraud may be by commission (an action) or omission (failure to disclose).
General Agency
An agency relationship where the agent has authority to handle affairs in a specific business or location. Example: A general manager of a business has broad authority to make operational decisions.
General Agent
An agent with powers defined under a general agency. A broker has a general agency relationship with sales agents but a special (limited) agency relationship with clients.
Goods
Under the DTPA, goods include tangible items like furniture as well as real estate purchases or leases.
IABS
Acronym for the Information About Brokerage Services form, which must be presented to potential clients at the first substantive discussion about a property.
Implied Authority
Agency authority that arises from custom and appearance rather than explicit agreement. It also includes the necessary authority to fulfill express authority. Example: A general manager of a business has implied authority to hire staff and purchase supplies.
Independent Contractor
The IRS defines an independent contractor as someone whose employer controls only the end result of their work, not how it is done. Example: A real estate agent controls marketing and work hours, but the client controls whether a house sells.
Intentional Torts
Torts include negligence cases and intentional wrongs that result in harm. Some intentional torts may also be crimes, such as assault, battery, wrongful death, fraud, conversion (theft), and trespassing. Defamation, including libel (printed or broadcast) and slander (spoken), is also a tort.
Intentionally
To do or say something with deliberate intent, not by accident.
Intermediary Brokerage
A broker acts as a go-between for the buyer and seller but does not have the same fiduciary duties to either party.
Intermediary
A broker employed to negotiate a transaction between parties while acting as an agent for both. Defined under Texas Real Estate License Act Sec. 1101.551.
Laundry List
A term referring to the list of specific prohibited practices under the DTPA.
Law
A body of binding rules of conduct prescribed, recognized, and enforced by authority.
Legal Guardian
A person with universal authority over a principal’s affairs, similar to a universal agent.
Listing Agent
The licensed broker who signs an agreement with a seller to market and sell the property.
Loyalty to Principal
An agent’s obligation to prioritize the principal’s interests above their own.
Loyalty
An agent’s duty to act in the best interest of their principal.
Master
In agency law, the master is the entity that gives orders in the master/servant (employer/employee) relationship. The client in a real estate transaction is the master.
Mediation
A dispute resolution process where a neutral third party negotiates a resolution between conflicting parties.
Misrepresentation
A false statement of material fact that influences a party to act. It can be intentional (fraud) or unintentional.
MLS (Multiple Listing Service)
A cooperative real estate database where member brokers list available properties for sale, including relevant details.
Monetary Damages
Also called money damages, this refers to the amount necessary to place an injured party in the same financial position they would have been without the breach or wrongdoing.
Net Listing
A listing agreement where the seller sets a required price, and the broker retains any excess amount as commission.
Nonfiduciary Duties
General duties owed to all parties in a real estate transaction, separate from fiduciary duties.
Obedience
The requirement that an agent follows the lawful instructions of the principal.
Open Listing
A listing agreement where the broker earns compensation only if they produce a ready, willing, and able buyer.
Ostensible Authority
Authority that arises when a principal’s actions lead a third party to believe the agent has power to act, also known as apparent authority.
Owner/Seller Disclosure Statement
A TREC-approved form (55-0) where the seller discloses the known condition of the property at the time of signing.
Power of Attorney
A written document in which a principal appoints another person as their agent, granting authority to act on their behalf.
Principal
The person or legal entity that grants authority to an agent to act on their behalf.
Privity of Contract
The legal relationship between parties to a contract, giving them enforceable rights and obligations under the agreement.
Procuring Cause
In real estate, refers to the actions that initiate and lead to the final sale of a property.
Puffing
The use of exaggerated or nonfactual statements in sales, such as claiming a house is “the most beautiful in the world.”
Punitive Damages
Damages awarded beyond actual compensation to punish wrongdoing and deter future misconduct.
Ready, Willing, and Able
In real estate, a buyer who is financially and legally capable of completing a transaction and has agreed to contract terms.
Reasonable Care and Diligence
The agent’s duty to exercise sound judgment and responsible practices while representing a principal.
Renunciation
The formal rejection or abandonment of a right, power, or privilege.
Rescission
The cancellation of a contract, restoring all parties to their original positions as if the contract never existed.
Revocation
The cancellation or withdrawal of authority, such as terminating a power of attorney. Revocation can be voluntary or occur automatically, such as upon the death of the principal.
Section 1031 Exchange
A tax-deferred exchange of like-kind properties under the Internal Revenue Code.
Section 5.008 Texas Property Code
The Texas law specifying the information that must be disclosed by residential property owners.
Selling Agent
The agent responsible for introducing the buyer to the property and securing an offer accepted by the seller. This can be the same as the listing agent.
Servant
In agency law, the entity that follows the master’s orders, such as a real estate broker serving a client. Sales agents working under a broker also serve clients on the broker’s behalf.“(A)n employee of an employer, technically one who works for a master.
A ______ is distinguished from an “independent contractor” who
operates his/her own business even though spending much time on the
work of a particular person or entity. The servant has established hours
or piece work, is under the direction of the employer even as to details,
cannot work for competitors, and acts for the benefit of the employer
rather than for himself/herself. A servant (employee) must have
workmen’s compensation insurance and social security coverage, pay
income tax deductions, and may benefit from various Federal and state
labor laws.”
Services
Includes work, labor, or services purchased or leased for use, but does not apply to professional services that provide advice, judgment, or professional skill.
Special Agency
Real estate brokers and sales agents have a _________with their clients and do not have the authority to make decisions for or sign documents for the client.
Special Agent
A person or entity appointed by the principal for a specific (special) and therefore limited purpose, such as locating a buyer for a property.
Statute of Limitations
Laws that place a time limit on the commencement of lawsuits. If the time has expired, the suit cannot be maintained.
Stigmatized Property
A property that has acquired an objectionable or unpleasant reputation due to something that occurred on it.
Subagency
An agency relationship that arises when a person operates as an agent of the principal through contact with the primary agent.
Subrogation
The substitution of one person in place of another with reference to a lawful claim, demand, or right.
Substantive Dialogue
A meeting or written communication that involves a substantive discussion relating to specific real property.
Substantive
Something that creates, modifies, or defines rights and duties, rather than being a simple change in form.
Texas Occupations Code
The statutes in Texas that regulate the licensing and conduct of various professions and businesses, including real estate.
Third Parties
Persons or entities involved in a real estate transaction who are not the buyer(s) or seller(s).
Tort
A civil wrong, whether intentional or accidental, that results in harm. Torts include negligence, intentional wrongs, and defamation.
Trade or Commerce
The advertising, offering for sale, sale, lease, or distribution of goods, services, or property.
TREC (Texas Real Estate Commission)
The state agency that licenses and regulates real estate salespersons, brokers, and inspectors in Texas.
TRELA
The statutory framework for the licensing and regulation of real estate salespersons and brokers in Texas.
Trustee
An individual or corporation appointed to manage property on behalf of another according to the terms of a legal arrangement.
Universal Agent
A general agent with broad authority, such as a property manager for a shopping center or a Power of Attorney.
Vicarious Liability
The attachment of responsibility to one person for harm or damages caused by another, such as an employer being liable for an employee’s actions.
Waiver
A unilateral act that results in the surrender of a legal right.
Agency
A relationship created when one person (the principal) delegates to another person (the agent) the right to act on his behalf.
Employee
A person hired by another to work for that party or business.
Errors and Omissions (E&O) Insurance
Insurance required for real estate agents to compensate the public for mistakes or misdeeds by licensed professionals. Similar to malpractice insurance for doctors and lawyers.
Exclusive Agency Listing
A listing agreement that allows the owner to sell the property themselves and not pay the listing broker a commission.
General Agent
An agent that holds broad powers defined by a general agency.
Indemnify / Indemnification
To protect against damage, loss, or injury; to compensate for damages suffered.
