Law of agency

Study notes

Estate agency work is agency law in action. This section covers how agency arises, the fiduciary duties an agent owes, when commission is earned, and who is bound when an agent contracts.

What you must know

• Agency arises by express appointment, by implication from conduct, by ratification of what the agent did without authority, or by necessity in emergencies.
• Fiduciary duties: obey lawful instructions, exercise due care and skill, account for all client monies, avoid conflicts of interest, and make no secret profit.
• The principal must pay agreed remuneration and indemnify the agent for expenses properly incurred.
• Commission is earned on the effective cause of the transaction — the agent whose efforts were the effective cause of the sale is the one paid.
• Warranty of authority: an agent who contracts without authority breaches the warranty and is personally liable to the third party.
• With a disclosed principal the contract binds the principal; with an undisclosed principal the third party may hold either the principal or the agent.
• Agency ends by revocation, renunciation, completion of the transaction, or the death/insanity of principal or agent.