Agency LawHARDFREE

An agency relationship in real estate is terminated in multiple ways. All of the following are likely to be the cause of termination of an agency relationship, except:

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Duration: 2:59

Question & Answer

Review the question and all answer choices

A

The incapacity or death of either the seller or broker.

Correct Answer
B

Revocation of the agency by the owner.

Revocation by the owner is a valid method of terminating agency relationships. Principals generally have the right to revoke authority at any time, though this may not relieve them of obligations already incurred.

C

Destruction of the property.

Destruction of the property makes performance impossible, which is an automatic termination of the agency relationship. The broker cannot fulfill their duties when the subject property no longer exists.

D

Estoppel.

Estoppel can terminate an agency relationship when a party's actions lead another to reasonably believe the relationship has changed or ended, preventing them from denying that belief.

Why is this correct?

Option A is correct because under California law, the death of a broker does not automatically terminate the agency relationship if the broker has designated qualified associates who can continue the brokerage operations. This exception makes it different from the typical termination by death rule.

Deep Analysis

AI-powered in-depth explanation of this concept

Agency relationships are fundamental to real estate transactions, creating legally binding obligations between parties. This question tests understanding of how these relationships can end, which is crucial for agents to avoid unintentionally continuing relationships that expose them to liability. The question's core concept centers on termination methods, requiring knowledge of both automatic and voluntary termination scenarios. To solve this, we must analyze each option against agency termination principles. Option A is tricky because while death typically terminates agency, California law has specific provisions regarding broker's death that don't automatically terminate the relationship. Option B represents voluntary termination through revocation, a valid termination method. Option C demonstrates objective impossibility, which automatically terminates agency. Option D, estoppel, prevents a party from denying facts that were previously established, potentially terminating an agency if relied upon. The challenge lies in understanding nuanced exceptions to general termination rules, particularly California's specific statutes regarding broker death.

Knowledge Background

Essential context and foundational knowledge

Agency relationships in real estate are governed by both common law principles and statutory regulations. California's Business and Professions Code, particularly sections 10130-10147, outlines requirements for agency relationships and their termination. While death typically terminates agency, California law provides specific exceptions regarding broker death. The law recognizes that brokerages often have systems in place to continue operations after a broker's death, allowing existing agency relationships to continue through designated associates. This practical approach prevents unnecessary disruption to pending transactions.

Memory Technique
acronym

D.R.E.A.M. for termination methods: Death (general rule), Revocation, Expiration, Agreement, Mutual consent, and Objective impossibility

Remember that California has an exception to the 'D' in D.R.E.A.M. when it comes to broker death

Exam Tip

For termination questions, remember California's exception: broker death doesn't automatically terminate agency. Look for this specific exception when 'death' appears as an option.

Real World Application

How this concept applies in actual real estate practice

A California broker suddenly passes away while representing a seller in an active listing. The seller believes the agency relationship is terminated and seeks to list with another broker. However, the broker's designated associate informs the seller that under California law, the agency continues through the brokerage's management structure. The seller must honor the existing agency agreement until its natural conclusion or formally terminate it according to its terms.

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