California Real Estate Broker ExaminationAgencyHard
A broker enters into an exclusive right-to-sell listing agreement with a seller. The agreement specifies that the listing will run for six months. Three months into the listing, the seller decides they no longer want to sell the property and instructs the broker to remove it from the market. What is the most likely outcome regarding the agency relationship?
- AThe broker can legally force the seller to keep the property on the market for the full term.
- BThe agency relationship terminates, but the seller may be liable for damages or commission.
- CThe agency relationship automatically terminates without penalty.
- DThe agency relationship continues until the original six-month term expires.
Show answer & explanationAnswer & explanation
Correct answer: B. The agency relationship terminates, but the seller may be liable for damages or commission.
A principal generally has the power to revoke an agency at any time, even if it's a breach of contract. However, revoking an exclusive right-to-sell listing before its term expires, without cause, would likely make the seller liable for damages suffered by the broker, which could include the commission the broker would have earned.
Why the other options are wrong
- A. Brokers cannot force a seller to keep a property on the market; specific performance is not an available remedy for an agency contract.
- C. This is incorrect. While the agency may terminate, there are usually consequences for breaching an exclusive listing agreement.
- D. The agency relationship generally terminates upon revocation, although the contractual obligation for compensation may remain.
Revocation of Agency by Principal
The principal's unilateral act of terminating an agency relationship, even if it breaches the agency agreement, which may lead to the principal being liable for damages or commission to the agent.
- Principal always has the power to revoke
- May not have the 'right' to revoke without penalty if it breaches contract
- Agent may sue for damages (e.g., lost commission, expenses)
- Effective upon notice to the agent
Memory trick: Agency ends, but sometimes a broken contract sends a financial friend.