Fundamentals of agency law
“Hello, my name is James … James Bond and I am … well … a Realtor.” In the Greater Vancouver area there have been a lot of famous real estate agents at one point, at least famous by name which is. In addition to James Bond and of course my own last name (‘Frascati’ is one of the famous wines of Italy besides the seventh hill of Rome), we have had Agents of the caliber of Omar Sharif, Vera Cruz, Charlie. F. Brown and a certain Giuseppe Mussolini (you could see him on the street because he invariably wore a black shirt and had that certain martial style … how would I say … goose step …). Not to mention Yuri Gagarin (no relation to the astronaut), Carl Marx, Richard (Dick) Nixon and, yes, Douglas MacArthur (tough guy to deal with …) with his newfound friend John Yamamoto, to name a few more. . . And, faithful to the oriental tradition that characterizes this neck of the woods, we have worn on several occasions a Ding Dong, a King Woo Kong as well as a Sing T. Sing, a Wu Win-chi Wu (who used the initials WWW) and two Ho Chi Minh’s. The longest name I have come across is Guillermo Oreporemotichovea (but his friends called him ‘Cy’ … no wonder) and the most memorable catchphrase ever adopted to my knowledge by a real estate agent belongs to an agent named Bob. Goodbye (now deceased, possibly starving …) who used to run newspaper ads like “List with Bob Bye – The Guy with the Tie”. However, despite the variety of names and lifestyles, all Agents, especially in real estate, must abide by the axioms of the Agency Law when it comes to fulfilling their professional mandates.
An agent is a person who is authorized to act on behalf of another person. The person for whom you are acting is called your Principal. Because the Agent has the authority given to it by the Principal, it can create a legal relationship between the Principal and a third party. For example, a purchasing agent may order goods from a third party on behalf of its principal, provided that the purchase is made within the scope of the agent’s authority. In such a case, the principal must pay for the goods because he is effectively bound by the agent in a contract with the third party. The agent, on the other hand, is not a party to the contract.
The relationship between an agent and its principal is created by contract. Under the agency contract, the agent has the authority to do certain things in place of his principal. In exchange for the service provided by the agent to act on behalf of its principal, the principal country the agent a fee or commission. Agents are not employees. The distinction between an agent and an employee is the degree of control and the method of remuneration. A manager tells the agent what he wants and lets the agent achieve the result. An employer, on the other hand, tells the employee what to do and how to do it. In addition, the agent is usually paid through a commission that is paid only when it contributes the result. An employee, on the other hand, expects to be paid for the number of hours he works regardless of whether the result is achieved or not. Real estate agents are a particular type of agent. A real estate agent acts on behalf of his principal, almost always the Seller, but can also act on behalf of a Buyer and, in fact, can act on behalf of both the Seller and the Buyer at the same time subject to certain restrictions. The contract that spells out the terms and conditions of authority conferred by a seller to the real estate agent is called a Listing Agreement. With the buyer, the name changes to the Buyer’s Agency Agreement.
Based on the wording of the contractual agreement between the principal and the agent, the authority to act vested in the agent falls into one or more of one of the following categories. The agent’s authority to act may be Fast, implicit,, by ratification,, usual, Y apparent,.
Express authority is the authority granted by the contract to the agent. The contract can be in writing or verbal. Real estate agents are generally given express authority under a Listing Agreement and here in British Columbia all listing agreements involving land or an interest in land (such as a lease) must be in writing to be enforceable. , in accordance with the Real Estate Services Law. It should be understood that a listing agreement is not a contract to sell or convey an interest in the land but, rather, an agreement by and through which one party (the Agent) agrees to market an interest in the land and the other party ( the Principal) agrees to pay a commission upon completion.
Even when precise words are used in express authority, an agent may find himself in circumstances where the acts he wishes to perform are not covered by those words. Sometimes it is possible to imply authority from precise words. More specifically, an agent would have implied authority to carry out an act if the agent has no choice but to do so in order to comply with his express authority. For example, the authority of a real estate agent may only be to sell a certain parcel of land or a certain house for its principal. The agent may want to show the property to potential buyers during the owner’s absence. If the agent had no authority to do so, both he and potential buyers would be trespassers and therefore liable to the owner for damages. Because showing a property is necessary and incidental to effect a sale, the agent may imply the authority directly from his express authority, provided that nothing in the contract indicates otherwise.
Authority by ratification
Sometimes an authority can be created retroactively. For example, when an agent enters into a contract on behalf of his principal, but the contract is beyond the express authority of the agent, he may be given authority in the past. This is done by ratification. If the principal consents after the fact to be bound by the unauthorized acts of his agent, he has ratified the contract. The bottom line is therefore that the principal is bound by the contract as if the agent had been authorized to do so in the first place.
The usual authority arises when the principal hires an agent to act in a particular transaction and that transaction is governed by the “customs of the trade.” In such a case, the principal is deemed to have given his consent for the agent to act in accordance with such customs, provided that they are legal and reasonable and the principal has not indicated otherwise.
Also, under certain circumstances, an agent may bind its principal to a third party even though the agent is not authorized to do so. This arises when a principal has acted in such a way as to induce third parties to believe that his agent has the authority to perform certain acts on his behalf. If the third party deals with the agent in the genuine belief that the agent has the authority represented, it is called apparent authority.
In general, anyone in their right mind can act as an agent, as the agent does not need to have the ability to outsource that the principal must have (see my article entitled ‘Basics of contract law’ for more information). As a result, a child agent (that is, an underage agent) can negotiate a binding contract between the principal and a third party. However, the fledgling agent is a party to the agency contract and therefore could use his own inability to hire and repudiate the agency contract with his own principal.