Colorado broker associate Priya is a designated buyer's agent for client Hank, who is purchasing a property from a seller represented by a different broker at a different firm. During due diligence, Hank tells Priya he has discovered a potential issue with the property's adjudicated water rights and wants to terminate the contract. However, Hank's attorney advises him that the contract's water rights contingency has already expired. Hank instructs Priya to falsely tell the seller that the water rights issue was discovered before the contingency deadline. What is Priya's correct course of action?
Correct Answer
D) Refuse to make the false statement and advise Hank that she cannot assist him in misrepresenting facts to the seller
This scenario involves the intersection of fiduciary duties, the limits of obedience, and Colorado's prohibition on misrepresentation. Priya's duties of loyalty and obedience to Hank are strictly limited to lawful instructions. Instructing Priya to falsely represent to the seller that the water rights issue was discovered before the contingency deadline is an instruction to commit misrepresentation — a violation of C.R.S. § 12-10-217 and grounds for license discipline. Priya must refuse to make the false statement, clearly explain to Hank why she cannot comply, and advise him to pursue legitimate legal remedies (such as consulting his attorney about whether any other contract provisions allow termination). This scenario also highlights Colorado's unique water rights framework, where adjudicated water rights are a distinct and critical property interest that can affect contract contingencies.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A non-agency relationship where the broker facilitates a real estate transaction without representing either party, owing limited duties of honesty, fairness, and competence to both.
The legal principle that holds a broker responsible for the actions of their agents and employees performed within the scope of the agency relationship.
An agency relationship created when a principal's actions or words lead a third party to reasonably believe that an agent has authority, and the principal fails to correct this belief.
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