Agency and Non-Agency Relationships
The Agency Relationship
Agency is a fiduciary relationship created when one person (principal) authorizes another (agent) to act on the principal's behalf. Creation can be express (written or oral agreement), implied (from conduct), or by ratification (principal approves an unauthorized act) or estoppel (principal's conduct leads third parties to believe agency exists). Know the difference between universal, general, and special agency; a real estate broker typically holds special agency limited to a specific transaction.
Duties and Liabilities
The agent owes fiduciary duties: care, obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill (COLDAC). A trap is confusing the duty of confidentiality (which can survive termination) with disclosure obligations to the principal. The agent is liable to the principal for breach; the principal is generally liable to third parties for the agent's acts within actual or apparent authority. Ostensible/apparent authority can bind a principal even without actual authority.
Types of Representation
Understand seller/landlord representation, buyer/tenant representation, dual agency (requires informed written consent where permitted), designated agency, and transaction brokerage/non-agency (ministerial acts only, no fiduciary duty). Subagency and its disclosure requirements appear in exam questions. Also know that compensation does not determine agency-a broker may be paid by the seller while representing the buyer, provided disclosure rules are met.
Worked Example
A broker tells a buyer, "I'll help you find a home-no obligation." If the broker performs only ministerial acts and discloses no fiduciary relationship, this is transaction brokerage, not buyer agency. The key question: was there an agreement (express or implied) plus fiduciary duties assumed?