California Real Estate Broker ExaminationAgencyMedium
A real estate broker is acting as a seller's agent. The seller informs the broker that they wish to withdraw their property from the market and terminate the listing agreement early, even though the agreement has two months remaining. What is the most accurate statement regarding the termination of this agency relationship?
- AThe seller has the power to terminate the agency relationship, but may be liable for damages.
- BTermination requires mutual agreement of both the seller and the broker.
- COnly the broker can terminate the agency relationship early, with proper notice.
- DThe agency relationship cannot be terminated until the listing agreement expires.
Show answer & explanationAnswer & explanation
Correct answer: A. The seller has the power to terminate the agency relationship, but may be liable for damages.
A principal always has the power to revoke an agency relationship, even if doing so breaches a contract. However, if the termination breaches the listing agreement, the principal (seller) may be held liable for damages, such as the broker's lost commission or marketing expenses.
Why the other options are wrong
- B. While mutual agreement is ideal, unilateral termination by the principal is possible.
- C. Both principal and agent can terminate, but the principal's power is paramount.
- D. Agency can be terminated by either party, even if it breaches a contract.
Termination of Agency by Revocation
The principal's unilateral act of ending an agency relationship. While the principal always has the 'power' to revoke, they may not have the 'right' to do so without breaching a contract.
- Principal always has the power to revoke.
- Revocation may lead to liability for damages if it breaches a contract.
- Agent's authority ends upon revocation.
Memory trick: Agency ends by Death, Completion, Agreement, or Revocation/Renunciation.