Laws of Agency and Fiduciary Duties
Creating the relationship
Agency arises by express agreement, implication from conduct, or ostensible authority created when a principal leads a third party to believe the agent is authorized. California requires a prescribed agency disclosure (the Agency Disclosure statement) before a buyer or seller signs an offer or listing, and disclosure of the agent's role - seller's agent, buyer's agent, or dual agent. Designated agency allows a brokerage to represent both sides through different licensees with written consent; subagency is effectively obsolete in California practice.
Fiduciary duties
Memorize the six duties commonly abbreviated COLDAC: Care, Obedience, Loyalty, Disclosure, Accounting, and Confidentiality. Loyalty forbids self-dealing and secret profit. Disclosure requires revealing material facts affecting value or desirability, but not confidential client information. Confidentiality survives termination of the agency - a trap the exam favors.
Traps
Obedience is limited to lawful instructions; an agent must refuse illegal directives. An agent's duty to disclose material facts does not extend to certain stigmatizing events California treats as non-material (for example, a death on the property, or an occupant's HIV status). A listing broker must supervise salespeople and may be vicariously liable for their acts within scope.
Rule of thumb
When a client confides something that would weaken their bargaining position, silence is the duty - loyalty outranks candor to the other side.
Worked example
A buyer privately tells her agent she would pay up to $600,000 for a home listed at $550,000. The agent must not reveal that ceiling to the seller's side and must present the offer at the price the buyer authorizes.