A California salesperson, without the broker's knowledge or authorization, conducts real estate transactions using the broker's license number. The broker discovers the conduct and promptly terminates the salesperson. Under California law, which of the following best describes the broker's potential liability for those unauthorized transactions?
Correct Answer
B) The broker may be held liable because the failure to detect the unauthorized conduct indicates a breakdown in the broker's required supervisory systems.
Under California Business and Professions Code §10159.2 and Commissioner's Regulation §2725, brokers have an affirmative, non-delegable duty to establish written supervisory policies and to actively supervise all licensed activities conducted under their license. When unauthorized transactions go undetected, that failure itself constitutes a violation of the supervisory duty — independent of whether the broker had actual knowledge. The DRE may impose disciplinary action on the broker for inadequate supervision, and the broker may face civil liability for failing to maintain systems that would have caught the misconduct.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.
An agency relationship where the agent agrees to act on behalf of the principal without receiving compensation.
An agency relationship created by the conduct or actions of the parties rather than by a written or oral agreement.
More Laws Of Agency Fiduciary Duties Questions
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