California Real Estate SalespersonLaws of Agency and Fiduciary DutiesHard
A property owner who listed with a broker dies suddenly while the listing is still active and before any buyer has been secured. What is the legal effect on the agency relationship?
- AThe agency terminates automatically by operation of law upon the principal's death
- BThe listing remains fully enforceable against the estate until its expiration date
- CThe agency continues but the commission rate is automatically reduced by half
- DThe broker must obtain a new license before continuing to market the property
Show answer & explanationAnswer & explanation
Correct answer: A. The agency terminates automatically by operation of law upon the principal's death
Agency relationships terminate automatically by operation of law upon the death or incapacity of the principal, regardless of the stated term of the listing agreement, because the agent's authority derives from the principal who can no longer grant it.
Why the other options are wrong
- B. Death terminates agency automatically; the listing does not survive to bind the estate.
- C. There is no automatic commission reduction rule tied to the principal's death.
- D. Licensing status is unaffected by the principal's death; the issue is agency termination, not licensure.
Termination of Agency by Operation of Law
An agency relationship automatically ends upon events like death, incapacity, or bankruptcy of the principal, without need for notice.
- Death or incapacity of principal terminates agency instantly
- Also occurs upon destruction of subject property or expiration of purpose
- Distinct from termination by mutual agreement or revocation
Memory trick: When the principal passes, so does the power to act for them.