An agent is a party who acts for and in place of a principal. The principal is bound by the acts of the agent. The law of agency defines the rights, duties, and responsibilities of all legal parties.
An agency can be created by:
- Express agreement, whether oral or written
- Implication, based on the custom or practice of the trade
- Conduct of the principal
Under the legal doctrine of estoppel, the principal is prohibited from denying the existence of a properly constituted agency.
If the agency relationship changes at any time during the transaction, the change must be disclosed in writing, and the party must consent to the change.
As a real estate agent, the term "fiduciary relationship" comes up on a regular basis. A fiduciary relationship is a legal relationship that creates a position of trust and confidence.
The acronym ACOLD will help you remember your duties in a fiduciary relationship.
As an agent, you must:
- A - be Accountable
- C - use Care and skill
- O - Obey legal instructions
- L - be Loyal to your client
- D - Disclose all pertinent information.
Loyalty means that the principal's interest must come before anyone else. It means keeping confidential information confidential, which is any information that would affect the bargaining position of the client. One example of this would be to not disclose that the client is going through a divorce.