Ch 6

Buyer Agency

A buyer and a broker may enter into a buyer agency relationship by executing a written representation agreement. A buyer's agent will negotiate on behalf of the buyer and will advise the buyer on all aspects of the real estate transaction.

Dual Agency

A dual agency is created when an agent represents both the buyer and the seller in a transaction. California allows dual agency relationships only with both parties' knowledge and consent. Because it is impossible for a single agent to fully represent the interests of both the buyer and the seller, a more accurate name for dual agency is limited dual agency.

General agent

A general agent is authorized to handle all of the principal's affairs in one or more specified areas. She has the authority to conduct a wide range of activities on an ongoing basis on behalf of the principal.

ostensible agency

A person has ostensible agency authority when he has no actual authority to act, but the principal negligently or deliberately allows it to appear that the person's actions are authorized. This type of authority corresponds to an agency created by estoppel.

Seller Agency

A seller agency relationship is established with a listing agreement. Under the terms of a listing agreement, the primary task of the seller's agent is to find a buyer for the seller's property at a price acceptable to the seller.

Special Agent

A special agent has limited authority to do a specific thing or conduct a specific transaction. Most real estate agents are special agents.

Actual authority

Actual authority is the authority the principal grants to the agent, either expressly or by implication.

Agency coupled with an interest

An agency is coupled with an interest if the agent has a financial interest in the subject matter of the agency. Such an agency cannot be revoked.

Agency

An agency relationship exists when one party, called the agent, has the authority to act for another party, known as the principal or client.

Express Agreement

An express agreement between parties will create an actual agency. When a principal appoints someone to act as his agent, and the agent accepts the appointment, an actual agency exists. Though most agency relationships are created in writing, a writing is not required.

Agency by Implication

An implied agency is created when an agent allows the principal to believe that an agency relationship exists between him and the principal. Unlike agency by estoppel, however, an agency by implication stems from the actions and words of the supposed agent rather than the principal.

Subagency

California allows subagency-the delegation of authority to an agent's agent-unless specifically prohibited by the principal.

notice

California's Civil Code requires notice to third parties when an agency relationship is rescinded or revoked. Notice is important because revocation is not effective as to third parties until they have received actual notice.

Warranty of Authority

California's Civil Code states that an agent who acts without actual or implied authority, or who acts outside the scope of his authority, is liable to third parties for a breach of an implied warranty of authority.

Express Authority

Express authority is agency authority created by an oral or written agreement.

Implied Authority

Implied authority is the unstated authority necessary to carry out the purpose of the agency. It includes those tasks that are not expressly stated, but logically flow from the agency's goals.

Imputed Knowledge

In California, both principal and agent are assumed to have notice of what either person ought to have communicated to the other in the exercise of ordinary diligence and care-even if the information was never actually conveyed. The agent's knowledge is automatically imputed to the principal, and the principal's knowledge is automatically imputed to the agent.

Termination by operation of law

Several events terminate an agency automatically, without action of either party. This is known as termination by operation of law. The terminating events include expiration of the agency term, fulfillment of purpose, death or incapacity of either party, and extinction of the subject matter.

Termination by action of the parties

The parties may terminate an agency relationship by mutual agreement, revocation by the principal, and renunciation by the agent. However, revocation or renunciation may lead to a breach of contract claim by the other party to the agency relationship.

The unilateral offer of subagency

The unilateral offer of subagency is a clause formerly included in MLS listing agreements. Under this provision, any cooperating agent who found a buyer for the listed property automatically became a subagent of the seller. This clause has generally been replaced by the cooperation and compensation provision.

Third Parties

Third parties are individuals outside an agency relationship who are affected by the agency. For example, when a seller's agent shows a house to a potential buyer, that buyer is a third party to the relationship between the seller and her agent, the broker.

Agency by Estopple

To form an agency relationship, the principal must intend to employ the agent to act on his behalf, and the agent must intend to accept the employment. This intent can be found in looking at words or actions.

Intent to Create an Agency

To form an agency relationship, the principal must intend to employ the agent to act on his behalf, and the agent must intend to accept the employment. This intent can be found in looking at words or actions.

Disclosure Requirements

To reduce confusion over agency relationships, California law now requires real estate agents to disclose which party or parties they're representing in a transaction.

cooperation and compensation provision

Under the cooperation and compensation provision, members of the MLS act as cooperating agents without necessarily becoming subagents of the seller. A cooperating agent is any agent who tries to find a buyer for a listed property.

Vicarious Liability

Under the doctrine of vicarious liability, a principal may be held liable for his agent's negligent or wrongful acts.

Agency by Ratification

When the principal gives verbal or written approval to an agent's actions after the fact, this creates an agency by ratification. The ratified actions may be performed by an agent who acted outside the scope of her authority or by someone who had no authority to act at all.