Law of Agency Cheat Sheet for RES Exam Revision

Agency is a fiduciary relationship where the agent acts on behalf of the principal with authority to affect the principal's legal position with third parties. Principal: the person who authorizes another to act on their behalf. Agent: the person authorized to create legal relations between the principal and third parties. Third party: the person with whom the agent deals on the principal's behalf. Fiduciary relationship: a relationship of utmost good faith, trust, and confidence requiring the agent to act in the principal's best interests. Mandate: the authority or instructions given by principal to agent. Ratification: retrospective authorization of an agent's unauthorized act by the principal. Key distinction: An agent differs from an employee (under direct control) and an independent contractor (no authority to bind another party). For RES exam purposes, understand that estate agents operate as agents for property sellers/landlords, creating binding obligations between principals and buyers/tenants.

Actual Authority: expressly or impliedly granted by the principal to the agent. Subdivided into: (1) Express Actual Authority - explicitly stated in writing or orally (e.g., written estate agency agreement specifying marketing powers), and (2) Implied Actual Authority - authority reasonably necessary to carry out express duties or customary to the agent's position. Apparent/Ostensible Authority: authority the agent appears to have based on the principal's representations to third parties, even if no actual authority exists. The principal is bound if: the principal represented the agent had authority, the third party relied on this representation, and the third party altered their position. Usual Authority: authority that an agent in a particular trade or profession customarily possesses. Estate agents typically have usual authority to market properties and arrange viewings but NOT to sign sale agreements on behalf of principals without express authorization. Remember: agents cannot delegate authority without principal's consent (delegatus non potest delegare).

1. Duty to obey instructions: Follow lawful instructions precisely; liable for losses from deviation. 2. Duty of care and skill: Exercise reasonable care, skill, and diligence expected of agents in that profession. Estate agents must meet industry standards in property marketing and transaction handling. 3. Duty of personal performance: Cannot delegate without authorization (exceptions: ministerial acts, customary delegation, necessity, implied authorization). 4. Duty of good faith/fiduciary duty: Act in principal's best interests, avoid conflicts of interest, disclose material information. 5. Duty not to make secret profits: All profits from the agency relationship belong to the principal; must account for any commission or benefit received. Estate agents cannot receive undisclosed commissions from both parties. 6. Duty to account: Maintain proper records, keep principal's property separate from agent's own, provide accounts when required. Breach of any duty may result in loss of commission, liability for damages, or disciplinary action by CEA.

Duty to pay remuneration: Principal must pay agreed commission when agent fulfills conditions. For estate agents, commission typically payable upon: (1) successful completion of transaction, (2) introduction of a ready, willing, and able buyer/tenant, or (3) as specified in the estate agency agreement. Quantum meruit: If no rate agreed, agent entitled to reasonable remuneration for services rendered. Duty to indemnify: Principal must indemnify agent for expenses, liabilities, and losses properly incurred while executing authorized duties. Does NOT cover losses from agent's negligence, breach of duty, or illegal acts. Duty not to prevent performance: Principal cannot prevent agent from earning commission by personally completing the transaction or withdrawing the mandate improperly. Lien rights: Agent has a lien (right to retain) over principal's property in their possession until commission and expenses are paid. Estate agents may exercise lien over documents but must act reasonably and in accordance with Estate Agents Act requirements.

Agency relationships terminate through: 1. By agreement: mutual consent, completion of specific task, expiry of fixed term, or conditions in agency agreement. 2. By act of parties: revocation by principal (may breach contract but ends authority), renunciation by agent (agent withdraws). 3. By operation of law: death of either party (authority ends immediately), insanity of either party, bankruptcy of principal (usually terminates), frustration (impossibility or illegality), principal becoming enemy alien. Notice requirements: Reasonable notice typically required unless agreement specifies otherwise. Estate agency agreements under CEA guidelines should specify termination terms clearly. Effect of termination: Agent must cease acting immediately, return principal's property, account for transactions, and cannot claim commission for incomplete transactions unless agreement provides otherwise. Irrevocable agencies: Agency coupled with an interest cannot be unilaterally revoked by principal. Remember: termination of actual authority doesn't automatically end apparent authority until third parties are notified.

Disclosed principal: When agent discloses they're acting for a named or identifiable principal, the principal is bound to the contract and can sue/be sued. Agent generally not personally liable unless they assume personal liability. Undisclosed principal: Agent contracts as if acting personally without revealing agency. Third party can sue either agent or principal once discovered, but not both. Principal can intervene and enforce the contract unless: agent expressly excluded principal's intervention, contract shows intention to deal with agent personally, or it would prejudice the third party. Unnamed principal: Agent discloses agency but not principal's identity. Principal can sue and be sued; agent not personally liable unless circumstances indicate otherwise. Agent's personal liability: Agent liable when exceeding authority (warranty of authority breach), signing contract personally, undisclosed principal situation, or principal is non-existent. Estate agents should always clarify their representative capacity in all written communications to avoid personal liability.

An agent who purports to act with authority impliedly warrants to third parties that they possess the authority claimed. If the agent lacks actual authority and the principal doesn't ratify the transaction, the agent is personally liable to the third party for breach of warranty of authority. Liability is strict - agent liable even if genuinely believing they had authority or acting in good faith. Remedies for third party: Damages to put third party in position as if warranty had been true (expectation loss), not punitive damages. Exceptions - agent not liable when: (1) third party knew agent lacked authority, (2) principal's lack of capacity caused the issue (e.g., company not yet incorporated), (3) agent expressly disclaimed warranty. RES exam focus: Estate agents must ensure proper authorization before making representations or signing documents. Always verify authority limits in estate agency agreements. Unauthorized promises about property conditions or transaction terms can trigger personal liability even if acting in good faith.

Ratification occurs when a principal retrospectively approves an agent's previously unauthorized act, making it binding as if originally authorized. Five essential conditions: (1) Agent must purport to act as agent - not on their own behalf; (2) Principal must exist and be identifiable at time of the act - cannot ratify if non-existent when act performed; (3) Principal must have full contractual capacity both at time of act and ratification; (4) Ratification must be of entire transaction - cannot ratify favorable parts only; (5) Ratification must occur within reasonable time and before third party withdraws. Methods of ratification: Express (written/oral statement) or implied (conduct indicating approval, such as accepting benefits). Effect: Ratification relates back to date of original act, making principal bound from that date. Limits: Cannot ratify illegal acts, acts void for uncertainty, or acts where third party has withdrawn. Estate agents should never rely on anticipated ratification - always secure proper authority before committing principals to obligations.

Key Latin maxims: Delegatus non potest delegare (delegate cannot delegate), Qui facit per alium facit per se (who acts through another acts himself). Commission entitlement: Agent must fulfill conditions precedent in agreement; effective cause principle determines which agent earned commission in multiple-agent scenarios. Conflict of interest: Estate agent cannot act for both buyer and seller without full disclosure and consent (dual agency restrictions under Estate Agents Act). Secret profits rule: Agent must disclose and account for all benefits received; breach allows principal to recover profit AND refuse commission. Actual vs apparent authority: Actual authority determines agent-principal relationship; apparent authority determines principal-third party liability. Notice of termination: Actual notice required for parties who dealt with agent; constructive notice sufficient for others to end apparent authority. The Prepare app provides 97 practice questions specifically on Law of Agency, plus comprehensive coverage across all 13 RES exam topics to help you master these concepts and achieve the 75% passing score.