National Real Estate Exam (PSI)General Principles of AgencyHard
An unlicensed office assistant, without any authorization, verbally agrees with a buyer to a $5,000 price reduction on behalf of the seller. The seller later learns of the agreement and signs paperwork formally accepting the reduced price. What has legally occurred?
- ACreation of a universal agency
- BImplied agency by conduct
- CRatification of an unauthorized act
- DAgency by estoppel
Show answer & explanationAnswer & explanation
Correct answer: C. Ratification of an unauthorized act
Ratification occurs when a principal accepts and validates an act performed without prior authorization, effectively making it binding after the fact. By signing the paperwork accepting the reduction, the seller ratified the assistant's unauthorized act.
Why the other options are wrong
- A. Universal agency refers to broad scope of authority, unrelated to validating a past unauthorized act.
- B. Implied agency arises from ongoing conduct suggesting representation, not a single after-the-fact approval.
- D. Agency by estoppel arises when a principal's conduct leads a third party to reasonably believe agency exists, not applicable here.
Ratification
A principal's after-the-fact approval of an unauthorized act performed on their behalf, making the act legally binding.
- Can be express (written/verbal) or implied by conduct
- Retroactively validates the unauthorized act
- Differs from agency by estoppel, which protects third parties relying on appearances
Memory trick: Ratify = Retroactive Yes