Law Of Agency Chapter 4

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Ideally, the agency relationship results from mutual consent between the
principal and the agent. Example, consent to act on a principal’s behalf and be
subject to the principal’s control. Agency can however be created by less formal
means. Implied agency occurs if the words or actions of the licensee lead the
customer to believe the licensee has become the customer’s agent

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Express means clear, definite, explicit, unambiguous. The agreement must be
in writing only if the broker wishes to have the right to bring a lawsuit for
commission (TRELA 20(b)); otherwise, the agreement may be oral or written.

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Implied authority applies to both express agency and implied agency. It is
authority not expressly granted by the principal, but rather authority necessary or
customary if the agent is to successfully perform. It would make for a rather
cumbersome contract if the all possible activities to be performed for the client had to
be addressed in the written contract.

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Ostensible means “for all appearances”. Example: If a brokerage office sign
is in someone’s front yard, the broker is “for all appearances” the listing agent of the
owner. Also see Wilson v. Donze; the buyer’s were led to believe that Wilson
represented the Donze’s.

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p.65) Contracts must be delivered to all parties to be enforceable. Notifying the
agent is regarded as having notified the agent’s principal (called imputed or
constructive notice). See Stortroen v. Beneficial Finance

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A license may be suspended or revoked for failure to specify a termination
date that is not subject to prior notice in a contract (other than property management
services).

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Since the agency agreement was entered into for a specific purpose, once that
purpose has been accomplished, the agency terminates. No further action is required
although the agent traditionally waits until closing of the transaction to collect the
commission.

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Common law rule: payment of the fee does not determine agency (Kelly v.
Roussalis). TRELA does not require written agency contracts. All involved must
know who is representing whom. Not only because of legal implications (i.e.,
imputed notice; ); but also due to professional and ethical responsibility. A licensee
owes the highest fiduciary obligation to the client.

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Knowledge of or notice to the agent is binding on the principal. Also called
“imputed notice. See Stortroen v Beneficial Finance.

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Licensees prohibited from disclosing any confidential information gained
during an agency relationship even after the relationship has been terminated. Similar
to the privileged information concept of a lawyer-client or doctor-client.

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Agency: How and When …

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Should be mutual agreement
Requires consent and control

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Agency: Texas Rules

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Written agreement to sue
Written permission to do certain things

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Written Agency Contract

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Duties of agent and principal
Expectations for compensation
Sufficient detail to protect both

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Agency Classifications…

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Express agency
Implied agency
Ostensible agency
Agency by ratification
Gratuitous agency

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Agency Classifications….
Express Agency

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Clear, definite, explicit, unmistakable
Agent acquires direct authority
May be oral or written
Examples: listing contracts or buyer representation contracts
Express vs. implied authority

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Agency Classifications….
Implied Agency

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No express agreement
Created by actions or words
To avoid: disclose and verify

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Agency Classifications…
Ostensible Agency

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Also called Agency by Estoppel
Ostensible: for all appearances
Court prevents denial of agency
Wilson v. Donze

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Agency Classifications….
Agency by ratification

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Agent performs unauthorized act
“Agency after the fact” if PRINCIPAL:

learns of the act
does not deny agent’s authority to act
benefits from the agent’s act

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Agency Classifications
Gratuitous Agency

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Payment of fee does not determine agency
Be careful when giving your “opinion”
Document agency: courts follow the money
Kelly v. Roussalis

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Important Issues….
Legal Effect

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Agent stands in client’s shoes
Liability based on agency status
Principal liable for agent’s actions

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Important Issues….

Constructive or Imputed Notice

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Constructive or Imputed Notice
Stortroen v. Beneficial Finance

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Important Issues

Professional & Ethical Responsibility

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Client owed: fiduciary duties (OLD CAR)
All parties entitled to:
Good faith, fairness, honesty
Accurate information and material facts

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Terminating Agency…

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Time
Actions of Principals & Agents
Operation of Law

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Terminating Agency….
Time

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TRELA requires termination date
May not automatically renew
Reasonable time period applies

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Terminating Agency….
Actions of the Principals

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Accomplishment of agency objective
Expiration of agency agreement
Mutual rescission
Revocation by the principal
Renunciation by the agent
Abandonment by the agent
Breach of fiduciary duty

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Terminating Agency
Operation of Law

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Death of the agent or principal
Incapacity of agent or principal
Supervening law
Bankruptcy, condemnation, destruction

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Duties that Continue

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Confidentiality continues forever
May disclose only with consent

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Payment of Fee ----to Create Agency

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Payment of Fee Not Necessary to Create Agency

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Suggestions for Brokers

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Develop Company Programs Clearly Stating Office Services
Office Policy: Report Variations Immediately