Humber/Ontario Real Estate Course 4 Exam Practice

Once an agency relationship is created between ABC Realty Inc. and Seller Yang, which duties does the principal owe to the agent?

1. Seller Yang takes responsibility for lawful acts done by ABC Realty Inc. on Yang's behalf and agrees to pay for services provided.

2. Seller Yang owes indemnification and must pay for services rendered.

3. Seller Yang must pay consistent rates for all brokerage services.

4. The principal must protect the interests of the agent with good faith and loyalty.

The correct answer is: Seller Yang takes responsibility for lawful acts done by ABC Realty Inc. on Yang's behalf and agrees to pay for services provided.

The principal in an agency relationship has specific responsibilities towards the agent, and in this scenario, Seller Yang's duties to ABC Realty Inc. include taking responsibility for lawful acts carried out by the agency on their behalf and agreeing to compensate them for the services rendered. This principle is rooted in agency law, where the principal is obliged to honor the agreements made and the actions taken by the agent within the scope of their authority. When the agency relationship is established, Yang must ensure that they support ABC Realty Inc. in fulfilling their duties, which involves covering any lawful actions taken on their behalf. This reflects a foundational concept of agency that the principal bears the results of the agent's actions when performed correctly under the agreed-upon terms. Moreover, compensation for services is a critical component of any agency arrangement, as agents typically rely on the principal to meet their financial obligations in return for their assistance and services. Other options do not encapsulate the comprehensive nature of the principal's responsibilities. They may focus more narrowly on specific duties that are not wholly representative of the overall obligations present in an agency relationship. For instance, while indemnification is an important aspect, it is generally a part of broader fiduciary responsibilities rather than the primary duty owed at the outset of the agency.