Lesson 5: Agency Law and Brokerage Relationships

Question 1

When is agency established?

Answer 1

An agency is established when a person, the principal, delegates authority to another person, the agent, to act on his behalf.

Question 2

fiduciary relationship is…

Answer 2

…a relationship that implies a position of trust and confidence.

Question 3

Who is a customer and who is a client?

Answer 3

The person or firm with whom the principal and agent negotiate is the third party. The third party is sometimes called the broker’s customer, and the principal, the broker’s client.

Question 4

There are three classes of agency:

Answer 4

Universal agency
General agency
Special agency

Question 5

Universal agency

Answer 5

With a universal agency, the principal gives the agent legal power to transact matters of all kinds for him.

Question 6

General agency

Answer 6

With a general agency, the principal gives the agent the authority to bind him in a particular trade or business through a continuous series of decisions or transactions.

Question 7

Special agency

Answer 7

With a special agency, on the other hand, the principal gives the agent the limited authority to conduct only a particular act or transaction. An example is a real estate listing.

Question 8

What is agency created by?

Answer 8

Agency is generally created by a contract–the employment agreement between the principal and agent.

Question 9

Actual authority

Answer 9

Actual authority is given either expressly or impliedly by the principal.

Question 10

Expressed authority

Answer 10

Expressed authority is that which is given the agent either orally, in writing, or by conduct.

Question 11

Implied authority

Answer 11

Implied authority, on the other hand, is that needed to perform the agents expressed authority. Implied authority may come from custom.

Question 12

Apparent authority

Answer 12

Apparent authority, also called ostens le authority, is that authority which the principal, by words or conduct, has led other people, third parties, to believe the agent has.

Question 13

Agency by estoppel

Answer 13

The principal will be stopped by the doctrine of estoppel from denying the agency. This is agency by estoppel. (Estoppel is the prevention by law of someone acting against his own act or deed.)

Question 14

Agency by ratification

Answer 14

When a person agrees to an act by someone claiming to be his agent who in fact is not his agent, or when a principal agrees to an act of his agent which goes beyond the agent’s authority, it is agency by ratification, and the person (principal) will be bound by the activity.

Question 15

Power of Attorney

Answer 15

If a principal empowers an agent to sign for him, or otherwise bind him, the principal must execute a power of attorney giving the agent that authority.

Question 16

Performance

Answer 16

Sometimes called obedience, is the agent’s duty to apply best efforts and diligence to perform the objectives of the employment agreement.

Question 17

When is the earnest money supposed to be deposited?

Answer 17

Earnest money has to be deposited in 3 business days.

Question 18

Indemnification

Answer 18

compensate (someone) for harm or loss

Question 19

The amount of Compensation

Answer 19

If no amount of compensation is agreed upon or stipulated in the agency contract, the principal owes the agent what is normally paid in the area for doing the specific job.

Question 20

Characteristic of a acceptable buyer are

Answer 20

Common law states that a broker will be paid when he finds a ready, willing, and able buyer.

Question 21

Reimbursement

Answer 21

The principal is responsible for reimbursing the agent for reasonable expenses incurred while performing authorized acts for the principal .

Question 22

Agency Coupled With Interest

Answer 22

An agency coupled with interest is one in which the agent has an interest in the subject of the agency–the property.
This type of agency is irrevocable .

Question 23

Gratuitous Agency

Answer 23

A gratuitous agency is one wherein the agent acts without charge or payment.

Question 24

A disclosed agency is…

Answer 24

… one in which the principal is revealed to the third party before contracting.

Question 25

A partially disclosed agency is…

Answer 25

… one in which the principal’s identity is not disclosed to the third party, but the third party knows the agent is representing a principal.

Question 26

An undisclosed agency exists …

Answer 26

…when the third party is not told that an agency relationship exists.

Question 27

What can terminate the agency?

Answer 27

Agency can be terminated by acts of the parties and by operation of the law.

Question 28

Terms of the contract termination

Answer 28

The agency contract will terminate the agency when the reason for the agency is accomplished or after a certain period has elapsed.