New York Real Estate Salesperson ExaminationLaws of AgencyHard
A real estate broker has a listing agreement with a seller. After several months on the market, the seller decides they no longer wish to sell the property and verbally informs the broker to remove the listing. What is the status of the agency relationship?
- AThe broker must obtain a written release from the seller to terminate the agreement.
- BThe agency relationship remains active until the listing agreement's expiration date.
- CThe agency relationship is terminated by the principal's revocation.
- DThe agency relationship is immediately terminated by mutual agreement.
Show answer & explanationAnswer & explanation
Correct answer: C. The agency relationship is terminated by the principal's revocation.
A principal generally has the power to revoke an agency agreement at any time, even if it breaches the contract. While the broker might have grounds for damages, the agency relationship itself is terminated by the principal's clear revocation of authority. A written release is best practice but not strictly required for termination of the agency itself.
Why the other options are wrong
- A. While a written release is advisable to avoid disputes, the principal's power to revoke authority terminates the agency even without it.
- B. The principal's revocation overrides the agreement's original duration for the agency relationship, though contractual obligations may remain.
- D. While it's the principal's decision, it's a revocation, not necessarily a mutual agreement if the broker isn't consenting to waive potential damages.
Termination of Agency by Revocation
The principal's unilateral withdrawal of the agent's authority to act on their behalf, which typically terminates the agency relationship.
- The principal generally has the power to revoke agency at any time, even if it breaches the contract.
- Revocation may lead to the principal owing the agent damages for breach of contract.
- The agency relationship (authority to act) ends, but contractual obligations (like compensation) may persist.
Memory trick: P.I.N.D.A.N.C.E. brings agency to an end.