California Real Estate SalespersonLaws of Agency and Fiduciary DutiesHard
A broker's unlicensed personal assistant, acting without express authorization, negotiates a price reduction with a buyer that the broker later learns about and knowingly accepts by proceeding with the sale at that price. What type of agency relationship has been created regarding the assistant's negotiation?
- AAgency by ratification, since the broker knowingly accepted the unauthorized act's benefit
- BAgency by estoppel, since the broker allowed the assistant to appear authorized
- CNo agency was created because the assistant was never licensed
- DExpress agency, since the broker later approved the negotiation
Show answer & explanationAnswer & explanation
Correct answer: A. Agency by ratification, since the broker knowingly accepted the unauthorized act's benefit
When a principal knowingly accepts the benefit of an unauthorized act performed on their behalf, an agency relationship is created retroactively through ratification, even though the act was not originally authorized. This differs from estoppel, which involves a third party's reasonable reliance on apparent authority.
Why the other options are wrong
- B. Estoppel applies when a third party reasonably relies on the principal's conduct suggesting authority, not simply subsequent acceptance.
- C. Licensing status of the assistant doesn't prevent the broker from ratifying the act for civil agency purposes.
- D. Express agency requires prior explicit authorization, which did not occur here.
Agency by Ratification
An agency relationship formed retroactively when a principal knowingly accepts the benefits of an unauthorized act performed on their behalf.
- Requires principal's knowledge of all material facts
- Differs from estoppel, which relies on third-party reliance
- Can validate a previously unauthorized act after the fact
Memory trick: Accept the benefit, ratify the act — even if it started unofficial.