TERMINATION OF AGENCY

TERMINATION OF AGENCY

Ordinarily an agency may be terminated in the following ways:

(a) The expiration of its term.

(b) The extinction of its subject.

(c) The death of the agent.

(d) The agent's renunciation of the agency.

(e) The incapacity of the agent to act as such. Civil Code § 2355.

1. When Principal May Revoke Agency

Because the relationship between a principal and agent is a personal one founded on the trust and confidence
which a principal places in his or her own agent, the principal has an absolute power under the law to revoke the
agency at any time unless the agency is coupled with an interest. For example, when the principal owns a real
property with the agent who is a real estate broker, and the two principals appoint the broker as the property
manager, the purpose and scope of the agency is coupled with the broker's interest as a joint owner of the
property.

Nevertheless, while the principal in most circumstances has an absolute power to revoke, the principal does not
necessarily have the right to do so and may be liable for breach of contract by revoking the agency without good
cause. The Civil Code provides that if the agency was created by a recorded instrument containing a power to
convey or execute instruments affecting real property, the revocation of the agency is not effective unless the
revocation is in writing and is acknowledged and recorded in the same place as the instrument creating the
agency.

2. Effect of Termination

According to Civil Code § 2355, notice of termination of an agency relationship must be given to third persons
if the agency is terminated as a result of expiration of the term, extinction of the subject matter or the death,
incapacity or renunciation by the agent. If the agency is in fact terminated in any of the ways enumerated in §
2355, the former agent is still an ostensible agent as to those third persons who have not received notice of
termination. If the agency is terminated through the death or incapacity of the principal or by the principal's
express act of revocation, it is effective as to third persons even though they have no notice. There is an
apparent internal contradiction in § 2356 in that it states that a contract entered into with an agent by a third
person who does not have actual knowledge of the death, incapacity or revocation by the principal is binding
upon the principal, the principal's heirs and other successors in interest.

3. Time When Revocation Can Be Made

As a rule, unless a real estate broker's authority is coupled with an interest in the property, the broker's
authorization may be revoked at any time by the principal. A real estate broker's right to earn a commission
under a listing agreement is not considered to be an interest in the contract which precludes termination by
death, incapacity or revocation on the part of the principal. This is true even if the broker is given a particular
time within which to perform under the terms of the listing agreement. On the other hand, the courts have
recognized circumstances where the contract of agency is irrevocable because the licensee has an interest in the
property which is the subject matter of the agency. While such agency contracts are generally irrevocable, the
real estate broker may still be discharged for breaching the fiduciary duties owed by the broker to the principal
or by acting adverse to the interests of the principal.

The principal's termination of the agency relationship by revocation may give a real estate broker a right to
damages for breach of contract or to the right to receive compensation pursuant to the terms of the listing
agreement. (Blank v. Borden (1974) 11 Cal. 3d 963-967). Withdrawal of the property from the market by the
owner prior to expiration of the listing is an example of a de facto revocation which may give the broker a cause
of action for agreed compensation under the listing contract. The California Supreme Court has held that a
clause in an exclusive listing contract providing for payment of the commission to the real estate broker on
withdrawal of the property from sale by the principal does not constitute an unenforceable penalty under
California law. If the listing is an open one, a sale negotiated by the owner or by a broker terminates the listing
and notice of termination need not be given to brokers other than the broker who has presented the offer which
has been accepted.

In the event an open listing specifies no fixed term of employment, the listing normally may be revoked by the
owner at any time without liability prior to production of a ready, willing and able buyer by the broker. If a

fixed term is specified it is possible that, despite revocation by the owner, the commission will be earned if the
broker produces such a buyer within the specified time.

Exclusive listing agreements must contain a definite, specified date of final and complete termination. If the
listing does not contain a definite termination date, the listing is unenforceable by the real estate broker and the
claim, demand or receipt of any fee under the agreement by the broker is a basis for disciplinary action against
that broker's license. (Business and Professions Code § 10176 (f)).