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Chapter 6, Contract Agency


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The relationship of trust in which one person (the agent) represents another (the principal) in dealing with third parties, as authorized by the principal.
A person authorized by another to act for him.
The transfer of ownership, rights, or interests in property by one person, the assignor, to another, the assignee.
Bilateral Contract
Contract in which a promise is given in exchange for a promise. All parties are bound to performance.
Something given in addition to". Generally used in exchanges to refer to something given other than the major properties to be exchanged" in order to equalize value. "
Breach of Contract
The failure to perform provisions of a contract without a legal excuse.
A statement to a potential buyer listing information relevant to a piece of property, such as the presence of radon or lead paint.
Unlawful force used to compel a person to do something against his will.
Estate at Sufferance
An estate resulting where there is retention of possession without the consent of the landlord, after expiration of a lease, creating a holdover tenancy.
Estate at Will
A type of lease which may be immediately terminated upon notice by either party.
Exclusive Right to Sell Listing
A written agreement between owner and agent giving agent the right to collect a commission if the property is sold by anyone during the term of the listing.
An intentional false representation or concealment of material fact, which is used to induce another person to act, which act causes a loss of property or legal rights.
Good Consideration
Love and affection (non-monetary). Does not establish basis for breach of contract.
One who is mentally incapable
A written employment agreement between an owner of a real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for a specific property, at a certain price and terms, in return for a fee or commission.
A false, incorrect, or misleading statement, account or explanation.
Net Listing
A listing which provides that the broker may retain, as his commission, that part of the sales price above a specified amount. Frowned upon in most states.
The substitution of a new obligation for an old one.
Open Listing
A property given to a number of brokers to market at the same time.
Parol Evidence
Provides that oral agreements may be used as proof of intent, only if the written contract is contradictory, illegal or ambiguous, and oral testimony would be required for proper interpretation.
Ready, Willing, and Able
phrase that pertains to a buyer, meaning someone who is legally capable of entering into a binding, unconditional contract, and who is financially able to perform it.
The offer of performance, not performance itself, and which, when justifiably refused, places another party in default and permits party making tender to exercise remedies for breach of contract. An offer of money.
Unilateral Contract
A promise for an act. Only one party is bound to perform (i.e., Option).
To have no force or effect. Never existed legally.
Prevents claim being honered after teh passiing of a statutory period of time
Statue of Frauds
The law that requires that most real estate contracts be written to be enforceable is the:
Chattel Real
What a lease is sometimes referred to as
An Estate at Will is?
A tenancy of uncertain duration
Principal - Owes four basic duties to his agent
a. Compensate the agent according to the agreement. If no amount of compensation is agreed to or stated, the principal must pay the agent on the basis of merits (Quantum Meruit).

b. Reimburse the agent for authorized expenses. If the agent incurs expenses in performing authorized acts for the principal, the principal has the duty to reimburse him for all reasonable expenses so incurred.

c. Indemnify the agent for loss suffered because of the agency. If the agent is acting in good faith based on statements of the principal, it is the duty of the principal to protect him against loss resulting from authorized acts.

d. Perform the agency contract as specified. The principal has the duty to abide by the terms of the agency contract. If the principal wrongfully breaks the contract, the agency is terminated but the principal will be liable for damages to the agent.
Agent Owes Four Basic Duties to His Principal

1. Care in performing the agency. The agent has the duty to use reasonable care in the performance of the agency. He can be held liable to the principal for any loss caused by his lack of care.

2. Loyalty to his principal. The agent owes a duty of loyalty and trust to his principal.
3. Accounting for all money and property received.
4. Perform the agency agreement. The agent has the duty to perform according to the terms of his employment contract. If the agent wrongfully breaks the contract, the agency relationship is terminated but the agent can be held liable to the principal for such breach.
General Agent
Is one who has wide authority to conduct a series of transactions of a continuous nature on behalf of his principal. A Property Manager is usually considered to be a general agent.
Operation of Law
Operation of Law - It is a principle of law that the agency will be automatically terminated by law upon the happening of an event which makes the agency relationship impossible or impractical

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