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Implied Agency

DEFINITION

Agency agreement created by the actions of parties, rather than the standard executed contract.

EXPLANATION

An implied agency is present when an agent may reasonably assume to have legal permission from the principal to undertake certain actions.

It is nearly impossible for all the duties of the agency to be established in the agreement. Therefore, implied authority grants an agent the power to perform reasonably expected real estate duties without them being expressly stated in the agency agreement. In determining whether he or she has implied authority, an agent should ask: “Is it reasonable for these actions to be performed for the success of the transaction?” (For legal purposes, however, it is advised that any action beyond what is described in the agreement be added to the agreement.)

Example of Implied Agency

For example, if a property owner wants to sell their property and grants an agent the right to represent their house, the seller is implying the existence of an agency relationship, even if it is not in writing. This means even if an agent and seller do not formally authorize an agency, if an agent presents a seller with a buyer, the seller must pay the agent a commission for being the procuring cause of the sale.

Proving the existence of an implied agency is difficult. It involves an agent providing direct evidence of his or her time and effort in closing a transaction. When an agent’s position and duties are not clearly defined, the agent runs the risk of not getting paid upon the close of a transaction. Consequently, an implied agency is not the preferred method for agents.

Establishing an Agency

There are four ways to establish an agency relationship between parties. The three ways are:

Conduct of parties (either an ostensible or implied agency

Actual agency originated from an agreement between parties

Ratification

Estoppels

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