Mod 2 - Law of Agency Flashcards
(160 cards)
1
Q
The legal relationship created when one person delegates another person to act on his/her behalf when dealing with third parties
A
Agency relationship
2
Q
What is created when one person, the agent acts on behalf of another, the principal, with the authority of that principal
A
An agency relationship
3
Q
The person delegated to act on the principal’s behalf
A
Agent
4
Q
The party that retains the services of a real estate broker
A
The client
The principal
5
Q
The party who is represented by an agent.
A
Principal
6
Q
The amount of debt upon which interest is calculated
A
principal
7
Q
The agent always represents his or her principal in a __ capacity
A
fiduciary capacity
8
Q
One who holds a position of trust and confidence for another
A
fiduciary
9
Q
the responsibilities owed by an agent to her principal, including duty of loyalty, duty of care, duty of disclosure
A
Fiduciary duties
10
Q
A relationship between two parties (usually a principal and an agent) that is founded on trust, confidence, loyalty and good faith
A
Fiduciary relationship
11
Q
When a licensee undertakes an agency relationship, what are they required to protect and promote as they would their own?
A
When a licensee undertakes an agency relationship, they required to protect and promote, as they would their own, the interests of the principal
12
Q
The agent has an obligation of absolute fidelity to the __ ___, and an obligation to treat all parties to the transaction __ and __
A
Principal’s interest
fairly and honestly
13
Q
What are the 6 Fiduciary duties
A
OLD CAR
Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care
14
Q
Describe the most important fiduciary duty owed to a principal
A
Loyalty. The agent must always put the interest of the principal first and ahead of all others. All actions of the agent should advance the position of the principal
15
Q
All actions of the agent should advance the position of the principal describes which fiduciary duty
A
Loyalty
16
Q
The act of disclosing; to expose
A
Disclosure
17
Q
The agent must obey all reasonable and lawful instructions of the principal as they relate to the purpose of the agency relationship describes which fiduciary duty?
A
Obedience
18
Q
T or F: In honor of the fiduciary relationship, agents must obey their principal’s instructions, even though it may be unreasonable or unlawful
A
F
Agents only have to obey reasonable and lawful instructions.
19
Q
T or F
The agent may share the principal’s secret with other parties
A
F
The principal’s secret should remain a secret. Confidential information shared with the agent must remain confidential and not be shared with other parties, unless authorization is given by the principal.
20
Q
The principal’s secret should remain a secret. Confidential information shared with the agent must remain confidential and not be shared with other parties, describes which fiduciary duty
A
Confidentiality
21
Q
T or F
In fulfilling his fiduciary relationship with his principal, the agent may forego his obligation to treat all other parties fairly and honestly
A
F
The fiduciary duties does not relieve the agent of the obligation to treat all parties fairly and honestly
22
Q
The agent must inform the principal of all facts which materially affect the subject matter of the agency describes which fiduciary duty
A
Disclosure
23
Q
Information is considered ___ if a reasonable person would attach importance to its existence or non existence in deciding whether or how to proceed in the transaction.
A
Information is considered MATERIAL if a reasonable person would attach importance to its existence or non existence in deciding whether or how to proceed in the transaction. It is also considered material if the licensee knows or has reason to know that the recipient of the information regards, or is likely to regard it as important in deciding whether or how to proceed, even if others would not regard it as important.
24
Q
Information is considered __ if the licensee knows or has reason to know that the recipient of the information regards, or is likely to regard it as important in deciding whether or how to proceed, even if others would not regard it as important
A
Information is considered material if the licensee knows or has reason to know that the recipient of the information regards, or is likely to regard it as important in deciding whether or how to proceed, even if others would not regard it as important
25
What are two ways to ascertain material information
1) inquiries to the seller/seller's agent about any physical conditions that may affect the property
2) a visual inspection of the property to determine if there are any readily observable physical conditions affecting the property
26
The agent must account for and safeguard all money other property belonging to the principal but in the agents temporary custody and control describes which fiduciary duty
Accounting
27
The agent needs to exercise reasonable skill, care and due diligence in the performance of her duties describes which fiduciary duty
Reasonable Care
28
T or F
As part of the agent's fiduciary duty of reasonable care, an agent is expected to perform all tasks required by the principal, regardless of whether they possess the skill training or expertise
F
If the agent does not possess the skill, training or expertise to properly represent the principal she needs to enlist the services of someone who does or suggest to the principal that they seek advice and assistance from another source
29
What are the three types of agency relationship. Who is the agent and who is the principal
A: Broker, P: Seller
A: Broker, P: Buyer
A: Salesperson, P: Broker
30
A person who conducts business with a real estate broker but is not represented by the broker.
Customer
| third party
31
The unrepresented third party in an agency relationship
customer
32
What are the four types of agency
Special agency (limited agency)
general agency
ostensible agency
universal agency
33
An agency established to accomplish only a specific purpose; a limited agency
Special Agency (limited Agency)
34
An Agency in which the agent is empowered to bind his principal in all matters, usually regarding a particular trade or business
General agency
35
An agency or authority which on the surface appears to exist because of a persons conduct but in reality does not formally exist
Ostensible Agency
36
A broad agency in which the agent is empowered to transact all matters of his principal
Universal Agency
37
Of the four types of agency relationships, which one ceases when the objective is realized
Special agency
38
T or F: most agency relationships established for real estate transactions are special agencies
T
| Agents, brokers and salesperson form special agency with the principal
39
What is an example of a general agency
Property manager
40
T or F: in an ostensible agency, the agent cannot be held liable because they were performing their fiduciary duty
F
| The agent can be held liable in an ostensible agency because they have never been granted any authority
41
Who creates universal agency
Universal agencies are usually created by a power of attorney
42
What are the three types of authority of an agent representing a principal?
Contractual authority
Implied authority
Apparent Authority
43
Permission/authority granted through the terms of a contract
contractual authority
44
The assumed authority an agent has in order to carry out his contractual authority
Implied authority
45
That authority which the public is justified in assuming the agent has
Apparent authority
46
what type of authority does a listing agreement or buyer representation agreement grant?
Contractual authority
47
What type of authority is necessarily granted in order for the agent to carry out his contractual authority
Implied authority
48
An agent for an agent; a subordinate agent
Subagent
49
What is it called when An agent representing a principal appoints another to also represent the interests of that principal
subagency
50
When an agent delegates their authority to represent the principal to another party, it is referred to as a
subagency
51
the recipient of the delegated authority in a subagency relationship
subagent
52
A real estate broker that represents the buyer
Buyer's broker, Buyer's agent
53
T or F
As an agent for the buyer, the broker owes the buyer all of the duties normally imposed on an agent but does not have to act in a fiduciary capacity
F
As an agent for the buyer, the broker owes the buyer all of the duties normally imposed on an agent and acts in a fiduciary capacity
54
A broker that introduces a client or customer to a listing broker with the understanding that the commission paid to the listing broker will be shared if a transaction is completed
cooperating broker
| participating broker
55
T or F:
An agent works for and has fiduciary duties to their customer but works with and treats their principal fairly and honestly
F
An agent works for and has fiduciary duties to their principal but works with and treats their customer fairly and honestly
56
A licensee that works only for the seller, represents the seller's interest, and owes legal obligations called fiduciary duties to the seller
seller's agent
57
What are the four types of business relationships a broker may enter into with their clients and who does the broker work for in each relationship
Seller's agent - seller
buyer's agent - buyer
disclosed dual agent - both the buyer and the seller
transaction broker - does not promote the interests of one party over another
58
Describe the two types of contract a buyer can enter into with their agent
Exclusive contract: restricts the buyer from working with any other agency
Open contract: permits the buyer to work with more than one buyer's agent at the same time
59
T or F: At any given time, a buyer can only work with one agent
F
A buyer is one restricted from working with any other agency when they have an exclusive type contract with their agent; if they have an open type contract, the buyer is permitted to work with more than one buyer at the same time
60
T or F: An agent can enter into a disclosed dual agent relationship with their client in both residential and commercial properties
F
| An agent can enter into a disclosed dual agent relationship with their client in ONLY residential properties
61
What must be a firm obtain in order to work as a disclosed dual agent?
The informed written consent of the buyer and the seller
62
T or F
| As a disclosed dual agent, you can advise or counsel either party
F
a disclosed dual agent will not be able to put one party's interests ahead of those of the other party and cannot advise or counsel either party on how to gain an advantage at the expense of the other party on the basis of confidential information obtained from or about the other party
63
T or F
| In NJ, a dual agency with dual compensation is only permitted when it is disclosed
F
| In NJ, a dual agency with dual compensation is not permitted even with disclosure
64
is a licensee entitled to compensation from both the seller and buyer when they act as a disclosed dual agent?
No. licensees are prohibited from receiving compensation from both a seller and a buyer for representing both in the same transaction
65
An agency where the agent has two principals with adverse interests in the same transaction. Attempting to arrange the best possible deal for both parties becomes an impossibility
Disclosed Dual Agency
66
The representation of one party by an agent
Single agency
67
licensees who represent one party in a sale or rental transaction
single agency
68
T or F:
Licensees are prohibited from entering arrangements that allow them to take compensation from a party who he or she does not represent
F
Licensees in a single agency relationship are NOT prohibited from entering into arrangements in which they are to be compensated by a party whom he or she does not represent, as long as a full written disclosure is provided. For example, getting the buyer to agree to pay a minimum commission.
69
A broker that does not represent or promote the interest of one party over those of the other party; they simply bring the buyer and seller together without representing either one
Transaction broker
70
T or F:
| A transaction broker does not promote the interests of one party over those of the other party to the transaction
T
| A transaction broker does not promote the interests of one party over those of the other party to the transaction
71
A broker who serves as a MANAGER of the sales transaction and FACILITATES the closing of a transaction
Transaction broker
72
T or F
Since a transaction broker does not represent either party, they don't owe any fiduciary duties; nor do they have to treat the customer honestly and fairly
F
| A transaction broker is required to treat all parties honestly and fairly
73
In what types of transactions is a licensee required to give a consumer information Statement?
The sale of residential 1 -4 family, Single family vacant lot, and residential lease that are not short term (not less than 125 days)
74
Define a short term lease
a lease that is no longer than 125 consecutive days
75
In what type of transactions is a licensee NOT required to give a CIS
Non residential transactions (commercial transactions)
76
The statement that defines the four business relationships that a firm may engage in in NJ
Consumer Information Statement (CIS)
77
When must the CIS first be supplied to a buyer? a seller?
The CIS must be supplied to buyers prior to any discussion about the buyer's motivation or financial ability to buy and to the seller prior to any discussion about seller's motivation to sell or desired selling price.
78
If the first meeting with a client is not in person, how does the agent supply the CIS
The licensee must verbally inform the client of the four business relationships described in the CIS. Then supply the client with a written copy at first meeting or the first time any material is sent to the client. But no later than the first showing of the property; if no showing is conducted, no later than the preparation of an initial offer or contract.
79
When is the final opportunity for the agent to present the client with CIS
no later than the preparation of an initial offer or contract
80
T or F
| Once the CIS is given to the client, the client must sign
F
| The client does not have to sign the CIS until there's a listing agreement, offer, contract or lease involved
81
What 4 things require that a client signs the CIS
listing agreement
offer
contract
lease
82
T or F
| Licensees only have to disclose the type of relationship to their principal
F
All licensees must disclose to other licensees what type of business relationship they have with any party they may be working with
83
T or F:
When an agent is acting as a dual agent, they must get informed written consent from their principal by getting the consumer information statement sign
F:
| When acting as a dual agent, informed consent is not acquired through distribution of the consumer information statement
84
When a seller's agent uses a computer generated notice, such as MLS, to list a house, what 3 things must the seller state for the benefit of other licensees
1. whether subagency is offered
2. whether the listing broker has the authorization of the seller to share the compensation
3. the amount of compensation that is offered
85
What type of agreement is created between a buyer and an agent?
a buyer agency agreement
86
What type of agreement is created between a seller/lessor and an agent?
a listing agreement
87
What are the characteristics (3) of an ideal buyer
RAW
| Ready Able Willing
88
When does an agent representing the seller earn their commission
A seller's agent earns the commission when the agent has produced a buyer that is Ready, Able and Willing (a RAW buyer)
89
What are the three responsibilities of the principal
1. paying the agent's fee
2. cannot hinder the agent's efforts or make it difficult/impossible for agent to do their job
3. cannot deliberately mislead the agent regarding material information or financial qualification
90
What fiduciary duty is broken by an agent who acts negligently or outside the scope of their authority
reasonable care
91
A hidden defect in the property that will not be discovered through a normal inspection
latent defect
92
the principals that govern the relationship of an agent with his principal
Law of Agency
93
A defect in the property that is clearly visible and will be uncovered through a normal inspection of the property
patent defect
94
A defect that is not easily discoverable (or visible) by a routine inspection of the property
latent defect
95
What are the responsibilities (6) of the agent to the principal
1) Fiduciary duties to principal/client
2) Treat 3rd party with fairly and honesty
3) ascertain all material information concerning the physical condition of the property by inquiries to the seller and a visual inspection
4) disclose all material information concerning the physical condition of the property
5) reveal latent defects, even when representing the seller
6) ascertain and disclose if a property is within a registered historic district
96
what is an obvious flaw that a reasonable or customary inspection of the property would reveal
patent defect
97
T or F:
| Licensees, in treating everyone fairly and honestly, must divulge both latent and patent defects
F
| They must only reveal latent defects and any information material to the physical condition of the property.
98
When a licensee has actual knowledge of the false, misleading or deceptive nature of information they provide concerning a property, or if the licensee knowingly conceals, suppresses or omits any material fact with intent that others rely upon it, they are in violation of?
Consumer fraud act
99
A writing which contains information about the physical condition of the land and improvements of the property being sold. the statement is completed and signed by the seller of the real estate
Property condition disclosure statement or seller disclosure
100
T or F: A seller disclosure statement is mandatory
F
| Use of a seller's property condition disclosure statement is not mandatory under new jersey law.
101
T or F: Information about social conditions or psychological impairments is considered to be information which concerns the physical condition of the property
F
Information about social conditions or psychological impairments is NOT considered to be information which concerns the physical condition of the property
102
T or F: When asked, licensees must provide whatever information they know about any social condition or psychological impairment affecting the property because they concern the physical condition of the property
F
licensees only provide whatever information they know about any social condition or psychological impairment affecting the property when they are asked because these factors do NOT concern the physical condition of the property
103
A letter from the NJ state attorney general regarding discrimination in real estate transactions
Attorney General's Memorandum
104
how does real estate commission watch for block busting
In order to prevent blockbusting (creating a panic in order to sell) licensees are required to keep a record of solicitation for a period of 1 year whenever they conduct in person solicitation of three or more listings on the same street
105
The rules of the NJ Real Estate commission require every licensed broker or salesperson who takes a listing for a residential property give the seller or landlord a copy of what so they will be aware that it is illegal to discriminate
attorney general's memorandum
106
The prohibited practice of attempting to induce any person to sell or rent a dwelling by representations regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, national origin or se
blockbusting (panic peddling)
107
T or F: A licensee can solicit the sale lease or listing of property on the grounds of alleged change in value due to the prospective entry into the neighborhood of a person of another race, religion, or ethnic origin
F. this is called blockbusting
108
When is a licensee required to keep a record of their in person solicitations? and Why
licensees are required to keep a record of solicitation for a period of 1 year whenever they conduct in person solicitation of three or more listings on the same street, otherwise they may be accused of blockbusting
109
What is an undisclosed dual agency
A licensee that purchases a property listed with him/her without making full disclosure to the client
110
T or F: The agent must make a reasonable effort to ascertain all material information concerning the financial qualifications of every person for whom he or he submits an offer to his or her principal
T: This is a fiduciary duty of reasonable care
111
The licensee must immediately deliver to all parties to any agreement of sale, lease, option, etc, a __ __ of the agreement
duplicate original
112
A licensee shall transmit every written offer on any real property or interest to the principal within ___ __ of receipt of the offer
24 hours
113
What are the obligations of a broker (3) to other brokers
1) notify any multiple listing system within 48 hours of taking a listing
2) transmit all written offers to their principal within 24 hours of receipt
3) not to place unreasonable restrictions upon the shower of properties
114
The opposition to business monopolies, price discrimination and price fixing
Antitrust laws
115
the agreement signed by the principal directing the listing broker not to cooperate at all with all other licensees
Waiver of Broker Cooperation
116
T or F: Part of a broker's obligation is not to place unreasonable restrictions upon the showing of the property, therefore, a listing broker can make a requirement that all appointments for showings must be made through their office
T: this is not considered an unreasonable restriction
117
a listing broker has to notify any multiple listing system to which a listing is to be submitted of having acquired the listing within __ __ of the effective date of listing
48 hours
118
A federal law enforced by the federal trade commission and intended to maintain competition in business by regulating things like price fixing and boycotting
Sherman antitrust Act
Clayton Act
NJ Antitrust Act
119
Federal laws intended to protect trade and commerce against unlawful restraints and monopolies, which tend to lessen competition
Sherman antitrust Act
Clayton Act
NJ Antitrust Act
120
What are the three laws broken by real estate brokers who unite to fix commission rates or the duration of listing agreements?
Sherman antitrust Act
Clayton Act
NJ Antitrust Act
121
The illegal practice of firms conspiring to set fixed prices or compensation rates in an effort to limit competition
price fixing
122
In an attempt to prevent price fixing, licensees are prohibited from
conspiring with any other licensee to establish, maintain or stabilize fees to be charged or commission splits
123
T or F:
| Agents can help their principal by talking to other agents and deciding the best and lowest price to charge a principal.
F. conspiring with any other licensee to establish, maintain or stabilize fees to be charged or commission splits is called price fixing and it is not allowed under the sherman antitrust Act, Clayton Act or NJ Antitrust Act
124
T or F:
Real estate agent cannot boycott any advertising medium because they accept advertisement of a competitive or discount nature
T. This is boycotting and it is not allowed under the sherman antitrust Act, Clayton Act or NJ Antitrust Act
125
Describe the two specific practices that are not allowed under the Sherman Antitrust Act ( or Clayton Act or NJ Antitrust Act)?
Price fixing - conspiring with any other licensee to establish, maintain or stabilize fees to be charged or commission splits
and boycotting - boycott any advertising medium because they accept advertisement of a competitive or discount nature
126
A broker can be held responsible for wrong doings of their salespeople if they had __ __
guilty knowledge
127
T or F
By forming an independent contractor relationship, a broker is not required to supervise the brokerage activities of their salesperson and can never be held responsible for wrong doings of their salespeople
F
A broker is required to supervise the brokerage activities of any salesperson employed, regardless of where the activities take place and they CAN be help responsible for wrong doings of their salespeople if they had guilty knowledge
128
T or F
A broker can be absolved of responsibility if they can prove they do not have guilty knowledge of unlawful activities handled by their employed salesperson through the office
F
A broker cannot be absolved if his lack of knowledge was due to a lack of proper supervision. The broker is judged both on whether or not they had guilty knowledge and whether he should have had knowledge
129
What are two things considered by the Real Estate Commission when investigating a broker's responsibility in the wrong doings of their employed sales persons?
they consider whether the broker had guilty knowledge and whether the broker should have had knowledge (happening in his office)
130
How many years must a broker keep most records?
6 years
131
A restriction that may be included in a Salesperson's employment contract that would restrict the salesperson's activities in the real estate business upon termination of employment
covenant not to compete
132
T or F:
When a salesperson or referral agent associate with a broker, an employment contract may be drawn up and signed by both parties.
F
When a salesperson or referral agent associate with a broker, an employment contract must be drawn up and signed by both parties.
133
T or F:
| If a contract between a salesperson and broker is not drawn up, the broker is held responsible
F
The real estate commission could take disciplinary action against either or both because the responsibility for entering into this contract is imposed on both the broker and the salesperson
134
T or F:
The mandatory requirements of a contract between a salesperson and broker is the rate of compensation to the salesperson, a covenant not to compete and a stipulation of payment to salesperson after 10 days
F
| a covenant to not to compete is not mandatory
135
The broker will pay all commissions due the salesperson within __ business days after receipt
10
136
How long does a broker have to
- deposit funds into business/trust accounts?
- complete an accounting for a terminated employee?
- pay a salesperson
- keep records
5 BD
30 D
10 BD
6 Yrs
137
What is the brokers responsibility to the salesperson after termination?
must make a complete accounting in writing of all commissions that are due or may become due to the salesperson within 30 days of termination
138
T or F:
If a terminated salesperson believes that the commission they received after termination is incorrect, they can file a dispute with the real estate commission who will investigate
F
the real estate commission only cares that the broker complies with the regulations of the employment contract and the accounting. they don't care about the amount of commission, which can be resolved by arbitration or court action
139
What three factors determine if a real estate agent is an employee or an independent contractor?
PAL
Production - they should be compensated on their sales/output, not on the number of hours worked
Agreement - there must be a written contract and it must state that the agent is not an employee
License - the salesperson must be properly licensed
140
liability insurance providing a real estate agent or other professional with coverage for errors, mistakes, or negligence that might occur in the normal conduct of business.
Errors and omission insurance
141
T or F:
| The Errors and Omission Insurance provides agents with coverage for errors, frauds and mistakes
F. it does not cover acts of fraud
142
statements made not as a representation of fact but more as a personal opinion and usually recognizable as such; part of a sales pitch
puffing
143
T or F: Agents can be held responsible for puffing
F
| Agents cannot be help responsible for puffing because they are opinions and not intended to be statements of fact
144
An agency relationship where the agent has an interest in the property he or she is representing. Examples include when a broker provides financing to a builder in exchange for an exclusive listing, or an agent has an interest in a property he or she is marketing
Agency coupled with an interest
145
A form of business ownership in which one person owns the assets of the business.
Sole proprietorship
146
T or F:
| An agent can not have a financial interest in a property he or she is representing/marketing
F
| They can and it is called an agency coupled with an interest
147
T or F:
Corporations can be property as a tenancy in severally, tenancy in common and joint tenancy; but not as tenancy in severalty because that is reserved for married couples
F
| They cannot buy property as a joint tenant because they have a perpetual existence
148
A form of business ownership in which one person is solely liable for all of the debts and other obligations of the business and does not have the protection that may be offered by a corporation or llc form of ownership
Sole proprietorship
149
What are the four characteristics of a corporation
1 Continuity of life - continues even after the death of stock holders
2 centralized management - board of directors
3 Transferability of Share - can sell shares
4 Immunity from liability - stockholders have no personal liability
150
A legal entity, separate from any of the individuals comprising it, formed by the operation of law through which business is transacted. an "artificial person" comprised of share holders
corporation
151
A partnership formed by two or more people for the conduct of business in which all partners are unlimitedly liable for the actions of the company
general partnership
152
A partnership, formed by two or more people for the conduct of business, made up of general partners and limited partners
limited partnership
153
Describe the two types of members in a limited partnership
1. limited partner - contribute capital but take no part in the management and have a limited to no liability
2. General partner - organize the partnership, contribute capital, responsible for the management and assume full liability
154
in a limited partnership, which of the partners organize the partnership, contribute capital, are responsible for the management and assume full liability
general partners
155
T or F
A limited partnership and a corporation both allow the partnership/corporation to continue in the event of death of any member/stockholder
T
156
in a limited partnership, which of the partners contribute capital but take no part in the management and have a limited to no liability?
limited partnership
157
A type of business ownership that is treated as a partnership for tax purposes but retain all the other attributes of a corporation
S corporation
158
An unincorporated form of business organization similar to a general or limited partnership, but possesses a limited liability shield which protects its owners from liability. A business ownership that combines the most attractive features of partnerships and corporations
A limited liability company
159
What is the difference between LLC and a Corporation
LLC lacks 3 of the corporation characteristics.
| 1. no continuity of life 2. no centralized management 3. no transferability without consent of other members
160
When is the only instance in which a buyer can back out from a sales contract?
When a material damage was not disclosed
