Contract Law for Real Estate Agents: Law of Agency and the Real Estate Agent

Comprehensive vocabulary flashcards covering the Law of Agency, the Vendors and Purchaser's Act, Fiduciary Duties (OLD CAR), and Dual Agency / Buyer's Sales Agents for real estate pre-licensing.

Agency

The relationship between a principal and an agent, in which the principal confers rights on the agent to act on the principal's behalf.

Agent

A person employed to do an act for another, or to represent another in dealings with a third person.

Principal

Someone who authorises another to act in their place.

Third person

A person who is not a party to the agency relationship, often referring to someone dealing with the agent on the principal's behalf.

Agency Formation

The methods by which an agency may be created: express appointment, agency by estoppel, ratification, agency of necessity, or agency arising from a presumption of cohabitation.

Agency Termination

The two broad ways an agency is ended: by operation of law (e.g. death, insanity, or frustration), or by act of the parties (e.g. mutual agreement, revocation by the principal, or renunciation by the agent).

Montgomerie v United Kingdom Mutual Steamship Association [1891]

The legal case establishing the general rule that the principal is bound by all acts of the agent done within their authority, and generally only the principal can sue, or be sued, on the resulting contract.

Irvine v Watson

The case establishing that where a principal instructs an agent to buy goods and pays the agent, who then fails to pay the seller, the principal remains liable only if the seller knew the agent was acting as an agent (unless the seller permitted late settlement).

Hamilton (Lena) v Miller (Ryan)

The case illustrating that an agent is exempt from liability where they acted strictly within the confines of their authority, following the principal's directions, even when this results in a liability.

Law Reform (Frustrated Contracts) Act

Jamaican statute governing the adjustment of rights and liabilities of parties to frustrated contracts, providing statutory limitations on liability.

Doctrine of the Undisclosed Principal

A rule applying when an authorized agent contracts on another's behalf while concealing the agency; once discovered, either the agent or the principal may be sued by the other party, and either may sue that party.

Vendors and Purchasers Act

Legislation governing the sale and purchase of real estate by defining the rights and obligations of both vendor and purchaser to protect both parties and ensure a fair, transparent transaction.

Good Root of Title

An instrument of disposition which, on its face and without extrinsic evidence, proves ownership of the whole legal and equitable estate sold, contains a sufficient description to identify the property, and casts no doubt on the disposing parties' title.

Commencement of Title (Section 2)

The provision of the Vendors and Purchasers Act that substitutes 40 years as the length of title a purchaser may require, absent a contrary stipulation.

Re Atkinson & Horsell's Contract (1912) 2 Ch 1

The Court of Appeal case holding that where a vendor contracts to give title starting with a particular instrument but instead establishes a good possessory title from a later date, the purchaser must accept that title.

“OLD CAR”

An acronym representing the six core fiduciary duties owed in real estate: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable Care.

Duty of Obedience

A fiduciary duty obligating the real estate agent to obey all lawful instructions given by their client.

Duty of Loyalty

A fiduciary duty requiring the agent to always act in the client's best interests, even ahead of the agent's own interests.

Duty of Disclosure

A fiduciary duty requiring the agent to disclose any material facts about the transaction, including any relationship to the other party.

Duty of Confidentiality

A fiduciary duty obligating the agent to safeguard and keep client information confidential unless express permission is granted to disclose it.

Duty of Accounting

A fiduciary duty requiring the agent to maintain accurate records of all money and property involved in the transaction.

Duty of Reasonable Care

A fiduciary duty requiring the agent to use reasonable judgment, skill, and diligence in handling the client's business.

Cooperating Sales Agent

An agent representing a different brokerage who works alongside the listing agent to bring a buyer, yet still owes core fiduciary duties to act honestly, diligently, and in the seller's best interest.

Real Estate Agent

A professional licensed to assist clients in buying and selling real estate who is compensated via commissions on completed deals and must work under a sponsoring broker or brokerage firm.

Real Estate Broker

An agent who has completed advanced training and licensing requirements, authorizing them to operate independently, employ other agents, and receive a portion of their employed agents' commissions.

Realtor

A real estate agent or broker who holds membership in the National Association of Realtors (NAR) and formally subscribes to its Code of Ethics.

Dual Agency

A transaction structure where a single agent or brokerage represents both buyer and seller concurrently, creating conflicting fiduciary duties toward both parties.

Buyer's Sales Agent

A real estate specialist who exclusively represents the buyer's interests by providing market expertise, MLS listing access, negotiation representation, objective advice, and transaction coordination.