Practice Chapter 4 - Agency Law

Question 1

Agency

Answer 1

The relationship between a principal and the principal’s agent, which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.

Question 2

Agent

Answer 2

One who acts for and with authority from another called the principal.

Question 3

Principal

Answer 3

The employer of an agent, such as a buyer or seller.

Question 4

Subagent

Answer 4

A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent’s principal.

Question 5

Dual Agency

Answer 5

An agency relationship in which the agent acts concurrently for both of the principals in a transaction.

Question 6

General Agent

Answer 6

An agent with full authority over one property of the principal, such as a property manager.

Question 7

Single Agent

Answer 7

An agent who works only for the buyer or the seller.

Question 8

Special Agent

Answer 8

An agent with limited authority to act on behalf of the principal, such as created by a listing contract.

Question 9

Sub-agent

Answer 9

A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent’s principal.

Question 10

Universal Agent

Answer 10

The agent who has complete authority over any activity of the principal; for example, power of attorney.

Question 11

Express Agency

Answer 11

An agency relationship created by oral or written agreement between the principal and the agent.

Question 12

Implied Agency

Answer 12

Agency that exists as a result of the actions of the parties.

Question 13

Ostensible Agency

Answer 13

A person who has been given the appearance of being an employee or acting (an agent) for another (principal), which would make anyone dealing with the ostensible agent reasonably believes he/she was an employee or agent.

Question 14

Confidentiality

Answer 14

An agent is obligated to safeguard his/her principal’s lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal’s bargaining position. The duty of confidentiality precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must, sell a property below the listed price. Conversely, a broker who represents a buyer is prohibited from disclosing to a seller that the buyer can, or will, pay more than what has been offered for a property.

Question 15

Fiduciary

Answer 15

A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under the rules of agency.

Question 16

Fiduciary Duty

Answer 16

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.

Question 17

Loyalty

Answer 17

An agent’s duty to place the client’s interest above those of all others, including the agent’s own self-interest.

Question 18

Obedience

Answer 18

This fiduciary relationship obligates the agent to act in good faith at all times, obeying the client’s instructions in accordance with the contract.

Question 19

Reasonable Care

Answer 19

The degree of caution and concern for the safety of himself/herself and others an ordinarily prudent and rational person would use in the circumstances. This is a subjective test of determining if a person is negligent, meaning he/she did not exercise reasonable care.

Question 20

Commission

Answer 20

An agent’s compensation for performing the duties of agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc. A fee for services.