ch9

Question 1

A principal can be held liable for the actions of their agent while the agent is acting within the scope granted in the agency agreement. This is known as the principle of:

Answer 1

vicarious liability.

In the case of an agency relationship, the principal can only be liable for the acts of the agent that were within either the actual expressed scope of the authority granted by the principal apparent or ostensible authority (that which is not in writing but is necessary to the performance of the expressed authority). The principal is not liable for the acts of the agent that are outside the scope and authority of the agency relationship. This is the principle of vicarious liability.

Question 2

The party granting authority for another to act on their behalf is known as the:

Answer 2

principal.

The principal grants authority to the agent.

Question 3

Agency relationships can be created by all of the following, EXCEPT:

Answer 3

by verification.

Verification has no significance in creating agency relationships.

Question 4

A person representing another’s interest without expectation of compensation is known as:

Answer 4

a gratuitous agent.

A gratuitous agent is one who acts as an agent for another without compensation.

Question 5

A real estate salesperson acting as a buyer’s agent:

Answer 5

is an agent of their broker and a subagent to the buyer.

A salesperson is the agent of the broker and a subagent of the client, whether buyer or seller.

Question 6

Which of the following can terminate an agency relationship?

Answer 6

Death of the principal or agent, Performance, Unilateral action by the principal or the agent

If the original agency contract or relationship was valid from the start, the agency relationship may still be terminated by Performance, Mutual Agreement, Death or Incapacity, Expiration, Resignation of Agent, Unilateral Discharge, Change in the Law, Material Change in Circumstances, or Bankruptcy

Question 7

The parties to an agency relationship are the:

Answer 7

principal and agent.

The parties to an agency relationship are the principal and agent.

Question 8

A dual agent must:

Answer 8

disclose the dual agency in writing and obtain the written consent of all parties to the transaction to the dual agency relationship.

Nevada requires that an agency disclosure form be given to a buyer or seller as soon as practicable and at the time a contract is entered into, the parties must sign an agency confirmation statement acknowledging agreement to the declared agency relationships in the transaction. This statement is included in the deposit receipt.

Question 9

An agency relationship created when a party gives approval to unauthorized actions after the fact is known as:

Answer 9

agency by ratification.

An agency by ratification occurs when a principal gives approval after the fact to a person who is without authority to act for the principal or to an agent whose actions have exceeded the scope of authority given in the agency agreement.

Question 10

A listing agent becomes a dual agent if:

Answer 10

Dual agency is created when both buyer and seller or two buyers negotiating for the same property are represented by the same broker.

Question 11

A real estate salesperson owes legal duties to:

Answer 11

Legal duties, although varied in scope, are owed to third parties, the principal, and the broker.

Question 12

A person holding a position of trust is known as:

Answer 12

a fiduciary.

A fiduciary is a person holding a position of trust, with said position imposing a number of legal duties.

Question 13

A person authorized to act for another under a properly executed power of attorney is known as:

Answer 13

an attorney in fact.

When signing for another under a properly executed power of attorney, the person signing will sign the name of the person granting the power of attorney, and sign their name as attorney in fact.

Question 14

The highest level of fiduciary duties a real estate agent owes are those owed to:

Answer 14

the principal/client.

While duties are owed to all parties in a transaction and to both parties when represented by the same agent, only in a single-agency principal/agent relationship are all the fiduciary duties legally possible.

Question 15

A listing agreement must:

Answer 15

be in writing.

Under the statute of frauds, all listing agreements must be in writing. An agreement for a commission is not required to make a listing agreement legally binding. A listing agreement must have a definite termination date and cannot contain an automatic renewal provisions. A listing agreement does not bind a seller to sell, even if a full price non-contingent cash offer is presented.

Question 16

A verbal agency disclosure is legally adequate in Nevada when:

Answer 16

Nevada requires a written agency disclosure form be given and acknowledged in all real estate transactions of one to four dwelling units.

Question 17

The relationship of a salesperson to their broker is usually a:

Answer 17

principal/agent relationship.

A real estate broker and all affiliated licensees are engaged in a principal/agent relationship.

Question 18

The duty to exercise reasonable skill and care is owed to:

Answer 18

Both the principal and third parties

The duties to exercise reasonable skill and care and the duty to deal honestly and in good faith are owed to ALL parties regardless of whether the licensee is in an agency relationship with a party to a transaction or not.

Question 19

The duty of loyalty owed to the principal means that the agent must not:

Answer 19

make any secret profits from the agency relationship, place the agent’s interests above those of the principal.

The duty of loyalty requires that the agent put the interest of the principal above all others. To make a profit arising from the agency relationship that is not disclosed to the principal would be breaching the duty of loyalty.