THE ESSENTIAL ELEMENTS OF ESTATE AGENCY
Agency is a fiduciary relationship that arises when one (a principal) manifests assent to another person(an agent) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent consents so to act in that capacity.
In today’s marketplace, individuals as well as corporate entities may find it difficult to complete the large number of transactions they deem necessary to accomplish their business goals. Representation can help solve this difficulty. It is in this context of an increased need for representation that agency arose. Agency business arrangements are utilized around the world as means of having presence in more markets, widening market share and increasing competitiveness in operational structure by using a third party’s infrastructure.
Agency is the most common and legally important relationship which often occurs in real estate transactions. Understanding agency is crucial to understanding the legal environment of business generally.
THE PRINCIPAL-AGENT RELATIONSHIP
The principal has a direct relationship with the agent. The principle-agent relationship can be created through agency contract expressively, and by implied conduct. The agent-third party relationship is crated through contract on behalf of the principal – third relationship is crated indirectly through the agent for whom the principal owes the third party obligation to perform the contract with the third party entered with the agent in the agent’s capacity as representative of the principal. Certain categorical statements can be made about the nature of agency relationship.
First, agency is a fiduciary as well as a consensual relationship between the principal and his agent. It is consensual because it is often created by the fact of consent which could be either expressly given or by implication; it is in fact indifferent and often independent of any specific form. More importantly, agency is a fiduciary relationship because it empowers the agent to act on behalf of the principal towards a third party based on trust.
Second, on account of the fact that an agent acts on behalf of his principal, he (agent) is an intermediary between the principal and a third party. Through his acts, an agent creates rights or obligations for the principal, thus affecting the principal’s legal relationship with a third party.
Third, the agent is subject to the principal’s control. This is the most critical element of agency. It is this element that determines whether an agency relationship exists or not.
Certain essential elements of agency can be drawn from the definition of agency in paragraph one above. In law, the existence of agency relationship is detected by searching for the presence of the three essential elements in the relationship between two persons/parties in business. Agency does not exist where these elements are lacking.
A case that illustrates the existence of three important elements of agency in order to establish that such relationship exists is the case of Jenson Farms Co. v. Cargil, Inc…The court had to determine based on the particular circumstances of this case if an agency relationship existed. Cargill had agreed with Warren Grain and Seed Co. and other grain elevators that they seek wheat growers. Warren contracted on Cargill’s behalf with various farmers. Up until Warren ceased operations, Cargil had financed Warren’s activities and gave Warren recommendations on what course of action to take in its operations. At the time of its cease of operations Warren was indebted with Cargill as well as the farmers, the plaintiffs, for several million dollars. The issue was whether Cargill, by its course of dealing with Warren, was liable as a principal on contracts made by Warren with the plaintffs.
The court stated that to create an agency, there must be an agreement. Cargill and Warren had agreed that Warren would seek contracts with farmers. There may be an agency even if the parties did not call it so and even if they do not intent the legal consequences of agency, as is clear in this case. The court established that Warren acted on Cargill’s behalf in procuring grain for Cargill as part of its normal operations. Cargill financed Warren’s operations, but the court found that Cargill was more than Warren’s simple financier; Cargill was an active participant in Warren’s operations. Cargill manifested its consent that Warren would be its agent by directing Warren to implement its recommendations. Thus, the court found all three elements of agency: a relationship between Cargill and Warren, Warren acting on Cargill’s behalf and Cargill’s control of Warren. Cargill is Warren’s principal and liable on the contracts Warren made with the plantiffs.
Any person who has the capacity to contract can appoint an agent to act on his or her behalf. Persons who lack contractual capacity cannot appoint an agent.e.g. insane persons and minors. An agency can be created for illegal purposes or are against public policy are void and unenforceable.
The doctrine of principals and agent was based upon three elemental propositions. These were:
(1) The creation by contract; express or implied of the relation
(2) The non-liability of the agent for contracts made in the name of his principal, and
(3) The liability of the principal for contracts made by his duly authorized agent
KINDS OF EMPLOYMENT RELATIONSHIPS
This is a type of relationship that results when an employer hires an employee to person some form of physical service. The employer-employee relationship is found most often in banks, universities, colleges, large corporations such as LSDPC and other private institutions as UACN that require agency services for their properties. The employee –agent is directly responsible to the officers of the owner-employer Corporation or institution, which may be the principal occupant of the property.
An employee is not an agent unless he or she is specifically empowered to enter into contracts on the principal employer’s behalf.
Agency is the word used to describe the special relationship between the principal (the one who hires) and the agent (the one who does the work). The written agreement that create this relationship is called the terms of engagement; it empowers the agent, to act on behalf of the owner, or principal, in certain situations. The agent is regarded as an expert on whom the principal can rely for professional advice; the agent acts for the principal; to bring him or her into legal relations with third parties. There is a distinction between the duties owed by the agent to a client and the treatment owed to a customer or third party. The client is the principal to whom the agent gives advice and counsel and whose interest must be put above the interest of all others. The agent is entrusted with certain confidential information about the principal. The agent work for the principal and with the customer.
An employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf. The extent of this authority is governed by any express agreement between the parties and implied from the circumstances of the agency.
Principal employ persons or businesses who are not employees to perform certain tasks on their behalf. These persons and businesses are called independent contractors. A principal can authorize an independent contractor to enter into contractors. Principals are bound by the authorized contracts of their independent contractors. The crucial factor in determining whether a person is an employee or an independent contractor is the degree of control that the principal has over that person.
At-Will Employees do not have employment contract. Under common law, an at-will employee could be discharged by an employer at any time for any reason. Exceptions to the at-will doctrine. Statutory Exception, Contract Exception, Public Policy Exception. (Casual workers are good examples of at-will employees)
PARTIES IN AGENCY
The central and most important aspect of an agency relationship is the fact that principal is the party that directs it. The control that the principal has over the agent’s actions is the basics feature of the relationship. The principal determines the terms of the agency relationship, has the right of control over the agent and decides when to end the agency relationship.
Principals may be disclosed principals, partially disclosed principals or undisclosed principals. The extent to which the third party is aware of the existence and the identity of a principal to an agent determines the type of principal that exists in an agency transaction.
Principal is disclosed if, when the agent and a third party interact, the third party has notice that the agent is acting for a principal and has notice of the principal’s identity. In transaction with this type of principal, the principal’s identity is known to the third party.
Principal is undisclosed if, when the agent and a third party interact, the third party has no notice that the agent is acting for a principal. In a transaction with this type of principal, the third party ignores the principal’s existence and believes that the agent is acting on his own behalf. In the third party’s eyes, the agent is the one that makes the agreement with him.
In the case of an undisclosed agency acting within the scope of his authority concludes the agreement with him.
In the case of an undisclosed agency the agent acting within the scope of his authority concludes the agreement with a third party, and both the principal and the third party obtain contractual rights against each other. Thus, although the principal is undisclosed at the time of the agreement, he is liable to the third party. Nevertheless, the agent has entered into the agreement in his own name, which could make him liable. Therefore, the third party may sue the agent and vice versa until the principal intervenes in the agreement or the third party learns of the existence of the agency relationship. At that point the third may choose to sue the principal.
A question that could arise is which type of agency is more binding to the principal: disclosed agency or undisclosed agency. Disclosed agency is more binding to the principal because in undisclosed agency the principal may never be held liable if third party does not learn of his existence or the principal never intervenes. The agent could be the only one held liable. In disclosed agency, the principal will always be held liable.
Another interesting exercise is to compare undisclosed agency with an agent acting with apparent authority. In apparent authority, the principal created circumstances that lead the third party to reasonably believe that an agent is authorized to conclude the agreement on his behalf. If an agent acts with apparent authority the third party is aware of the existence of the principal at all times, whereas in undisclosed agency the third party may or may not become aware of the principals existence. If the third party does learn of the principal’s existence it would be until after the initial agreement with the agent.
Generally speaking, a relationship known as agency arises whenever a person called “the agent” has express or implied authority to act on behalf of another called “the principal” and consents so to act. The primary sense in which the word agency is used is when a person is appointed to create a binding contractual relationship between the principal and a third party. If in the exercise of his express or implied power given by the principal, an agent enters into a contract with a third party and expressly states that he is acting for and on behalf of a principal, the agent will then create a binding contract between the principal and that third party. The word agency may also be used to describe the situation where a person is appointed by another to do acts on his behalf. In Nigeria, estate agents are rarely authorized to enter into contracts on behalf of their clients.
Agent compared with employee
An employee is subject to the direct control and supervision of his employer and has to obey the lawful and reasonable order and instruction of his employer in respect of matters within the scope of his employment. An employee is often the agent of his employer for certain purposes, but not all agents are employees of their principals.
Agent compared with independent contractor
Unlike an agent, an independent contractor does not normally have authority to enter into a binding contract on behalf of his employer with a third party
Agent compared with attorney
An attorney is a special form of agent appointed by a principal by deed (known as “power of attorney”) to create a legally binding contract on behalf of the principal with a third party or to do any other acts on behalf of the principal, only a duly appointed attorney by deed can execute a deed on behalf of his principal.
Agent compared with broker
A broker is a mercantile agent who is appointed to make contracts for the purchase and sale of goods, but is usually not entrusted with possession of the goods. His remuneration consists of commission (brokerage) and a broker generally contracts in the name of his principal.
The basic purpose of the agent is to represent the principal’s interest as the agent interacts with third parties, playing an intermediary role between them. The agent also assumes a role of representation, playing this role is the basis for imposing fiduciary obligation on the agent and for binding the principal to the consequences of the agent’s acts. These roles explain the importance if trust in agency relationships.
The agent may be of various kinds, such as subagents, co-agents, general agents and special agents.
Co-agents have agency relationships with the same principal. A co-agent may be appointed by the principal or by another agent actually or apparently authorized by the principal to do so. Since there is more than one agent acting on behalf of the principal, the principal may designate superior and subordinate co-agents. A superior co-agent has the right, conferred by the principals, to direct a subordinate co-agent.
A subagent is a person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal and for whose conduct the appointing agent is responsible to the principal. The relationship between an appointing agent and a subagent is one of agency. Thus, subagents owe fiduciary duty in both the agent that appointed the subagent and the principal that appointed the agent. This would mean that the subagent can create tort liability for both.
It is clear in establishing that the appointing agent is responsible to the principal for the sub-agent’s conduct. This responsibility has its roots in the fact that the appointed agent is delegating to the subagent the functions that it owes to the principal. However, the principal must not be kept in the dark as to what the agent and the subagent’s responsibilities are in light of their accord. The principal ought to know the terms and scope of the agent’s delegation of functions to the subagent, as well as the compensation accorded.
A subagent who does not have a contract with the principal cannot qualify for protection merely because he is self-employed and has authority delegated to him by the principal’s agent or sells goods on behalf of the principal. If a subagent is given rights and protection against a principal, it would expose the principal to double liability both to his agent and to any subagents.
General Agents and Special Agents
Agents can be classified according to the scope of their action. A general agent is authorized to conduct all the transactions necessary to accomplish the objects of its appointment as agent, if not specifically indicated. The special agent, unlike the general agent, only conducts the transactions it was specifically instructed to perform, no more. This distinction becomes important when determining the principal’s liability because the principal will be held liable for the general agent’s acts even if they are not expressly authorized (due to apparent authority or estoppel), where as in the case of the special agent the principal will not be liable for the special agent’s unauthorized acts.
A general agent is one who is authorized to conduct a series of transactions involving a continuity of service. General agents tend to be an integral part of a business enterprise and do not require additional authorization for transaction which they conduct on behalf of their principal
A special agent is one who conducts a single transaction or series of transactions not involving continuity of service. A real estate agent is usually a special agent although, in appropriate circumstances, a form of general agency can arise. The distinction between a general and special agent is important when determining the extent of an agent’s authority to bind the principal to agreements made by the agent with third parties, and when the defining the course and scope of the agency relationship.
Real estate brokers typically exercise limited authority as special agents to solicit and negotiate on behalf of their principals from whom they must obtain ratification of agreements with third parties. Real estate brokers and associate licenses they have engaged are neither licensed nor regulated as special agents to carry out on behalf of another or others certain defined activities for compensation or expectation of compensation in real property and real property secured transactions.
Definition of Estate Agent
The estate agent has simply been defined as the party who is hired to represent the interest of another, the principal, in dealing with third parties. It is regarded as an expert on whom the principal can rely for specialized professional advice.
A Similar definition of the estate agent has been stated in terms of seller and buyer “An estate agent is to bring together the sellers and the buyers of properties. The agent acts for and owes a duty to the seller”. Therefore, seller is the principal who hires the estate agent to represent the seller interest in dealing with the buyer.
A more detail definition of estate agent is given by the Working group on Regulation of Estate Agents who recommended that an estate agent should be defined as follows:
(a) The business of an estate agent is
– Selling, buying, exchanging, letting or taking on lease of or otherwise dealing with or disposing of: or
– Negotiating for the sale, purchase, exchange, letting or taking on lease or any other dealing with or disposition of any real property on behalf of any other person;
(b) Any individual or corporation who carries on or holds himself out to the public as ready to undertake the business of an estate agent is an estate agent;
(c) Any individual or corporation within the definition of (a) is an estate agent whether or not he carries on any other business, or obtains any consideration in a property transaction; and
(d) Someone who indirectly engages himself in estate agent work via a third party should be deemed as an estate agent
With regard to the job nature mentioned above, the definition of “estate broker” which is adopted in the United State of America seems to be similar “estate agents” although their names are different. As estate agent is only a collective name for several terms 10, the definition of estate agent in this study is including “property agent”, “properly salesperson” , “real estate agent” and “Estate broker” which are commonly used in other countries but with the similar job nature.
Traditional Estate Agency Functions
Introduction of the vacant property to prospective tenants
Sorting of the prospective tenants to select good one in the best interest of the Landlord.
Negotiation of Rent on Open Market basis subject to Landlord’s Directives.
Collection of rent and prompt remission to Landlord with periodic rent returns
Taking of inventories and getting thee Tenancy Agreement properly executed before the tenant takes possession
Find accommodation for clients
Arranging letting, selling and buying of properties
Classification of Agent
The agents can also be classified into 2typees by their operation mode. They are single-agency broker and dual-agency broker
Single Agency Broker
The single-agency firm represents only one side in any given transaction: either the seller or the buyer. The single-agency broker never represents both buyer and seller in the same transaction”
The dual-agency broker represents both buyer and seller in the same transaction. Dual agency requires written, informed consent to be legal”
In fact, the agents usually represents the seller in the past practices. However, there is a growing trend for purchasers of real estate to have representation.
The new term “a buyer’s agent” is born which is hired and paid by the buyer, and acts as the buyer’s agent.
The different between the seller’s agent and buyer’s agent is that the agent hired by a seller is limited to finding a ready, willing and able buyer for the property. For the agent hired by a buyer, he would have the limited responsibility of finding a property that fits the buyer’s criteria.
The Operational Model
There are different ways to engage agents. Following types exists Sole Agency-sole right for a couple of months
Master Agency– You as a master agent are handling all the marketing and get a percentage for that, and then any other agent can sell the property and get a part of the fee.
Two agents are selling the building together, for example a big building with different kinds of use that may be different agents to get out the best price.
Non Exclusive Agency– Anyone is able to sell the building
Off Market Contract – No agency until the standard purchase agreement is signed
INTERACTION BETWEEN THE PARTIES
The Principal-Agent Relationship
The principal is the party that establishes the agency relationship by selecting the agent which in his judgment possesses the appropriate talents for the task assigned. The principal defines the terms of the agency and has the right of control over the agent’s actions. The principal expects loyal service from the agent, not just due performance of his duties. Principal has a duty to deal with information about risks of physical harm or pecuniary loss that the principal knows, has reason to know, or should know are present in the agent’s work but unknown to the agent. Finally, the principal usually determines when the agency relationship concludes.
The agent has the right to determine the course of action in order to achieve the task appointed by the principal due to the authority conferred to him by the principal. The agent behaves trustworthy by performing his duties. Also, the agent must notify the principal of any communication with third parties because any notice to an agent by a third party is effective as a notice to the principal has actual or apparent authority to receive the notification. In turn, the principal compensates the agent for his work and reimburses the expenses the agent may have incurred on in achieving the task appointed.
Compensation to the Agent
The principal has a duty to indemnify an agent:
(i) In accordance with the terms of any contract between them; and
(ii) Unless otherwise agreed
(a) When the agent makes a payment
(i) Within the scope of the agent’s actual authority, or
(ii) That is beneficial to the principal, unless the agent acts officiously in making the payment; or
(b) When the agent suffers a loss that fairly should be borne by the principal in light of their relationship?
BREACH OF FIDUCIARY DUTY BY THE AGENT
As stated above, the agent is expected to act loyalty at all times towards the interest of the principal. Because of the fiduciary duty imposes on the agent, the principal cane expect the agent to serve him loyalty. Therefore, the agent’s breach of fiduciary duty contravenes the principal’s expectancy of faithfulness by the agent.
Usually, a breach of fiduciary duty by the agent arises due to a conflict between the agents pursuing his own interests. Also, an agent may breach his fiduciary duty by representing another principal with conflicting interests with his original principal, or even inadvertently or by a failure to exercise care.
The legal remedies for breach of duty by an agent derive from contract law, tort law, restitution and unjust enrichment. Naturally, these remedies are ex post because they occur only after the agent breached his duty and the agent has been found liable for his actions. Similar to standard remedies for the breach of a contract, the remedies for an agent that has breached his duty also create an incentive for an agent to perform loyally and to honour his commitment towards the principal. Therefore, remedies can functions as an ex ante incentive since the agent needs to take them into account before breaching his duty.
An agent that has breached his duty is subject to liability for the loss caused to the principal. To establish such loss it is only necessary to establish that the agent’s misconduct played a substantial role in the negative outcome for the principal’s interests. An agent may also be liable for punitive damages caused to the principal, as long as the circumstances fulfill the standards for their imposition. Furthermore, an agent may also be liable for misuse of the principal’s assets or property.
Additionally, an agent’s breach of fiduciary duty is actionable within tort law and could also be liable under restitution law and unjust enrichment. This would arise if the agent has recovered a material benefit or made a profit as a result of his breach of duty.
This is exemplified in Tarnowski v. Resop, where the agent received a secret commission from a third party and the court held that all earnings in the course of an agency belong to the principal.
The Principal-Third Party Relationship
The principal choose to delegate his tasks to an agent and interacts with third parties through the agent. Thus, the principal has duties to third parties. The principal is liable on the contracts made in his name by the agent, and is responsible for the performance of those contracts. Whenever an agent acting with actual or apparent authority for a disclosed or partially disclosed principal makes a contract on his behalf, the principal and the third party are parties to the contract. If an agent acting with actual authority granted to him by the principal performs an act on behalf of an undisclosed principal and thereby contracts with a third party, the principal is normally a party to the contract unless he is expressly excluded by the contract. The principal is also liable for the agent’s statements and representations while him negotiating and completing a contract.
The Agent-Third party Relationship
The consequence for the agent in acting for the principal when dealing with third parties is that the right of action against third parties belongs to the principal, and therefore the agent has very limited rights against third parties. However, the agent and a third party may agree that the agent becomes a part of the contract that he has negotiated on behalf of a disclosed or partially disclosed principal with the third party.
In the case of the agent making the contract on behalf of an undisclosed principal, the agent and the third party are parties to the contract. Therefore, in such cases with the agent would have the right of action against the third party.
The Agent’s Authority
An agent has the power to act on behalf of his principal. When an agent exercised his power to act for the principal, the principal becomes bounded to the contractual agreements made by the agent. The principal may be bound due to the agent’s actual authority, the agent’s apparent authority, inherent authority, by estoppel, through ratification and by torts committed by the agent.
The Principal determines the terms of the agency relationship with the agent and therefore establishes what he wishes the agent to do on his behalf. An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s wishes the agents so to act, the third party’s belief of the extent of the agent’s authority is irrelevant due to the fact that the agent’s actual authority is established and determined when the principal manifests to the agent what he is to accomplish.
The agent’s actual authority can be classified as either express authority or implied authority.
An agent has express actual authority when the principal specifically authorizes the conduct by the agent. There is an explicit authorization from the principal to the agent where the principal gives the agent the authority to perform certain actions to complete an established task.
Nevertheless, in the modern commercial setting it is impossible for the principal to foresee all the actions the agent will need to take in order to complete the task. This is the reason behind the existence of actual implied authority.
Actual implied authority arises when it is necessary for the agent to fulfil the task appointed by the principal. The agent must act in such a way as to seek to complete the task appointed to him by the principal. Through actual implied authority, an agent can take actions that are incidental to fulfilling the agent’s express actual authority. The agent has not been specifically authorized to take a certain action, but he can reasonably infer that he has authority to do so in order to fulfill the task.
Sometimes agents incur actions that exceed their actual authority. Even when the agent does not possess express or implied actual authority, he can still bind the principal to the consequences off his acts if he has apparent authority. Apparent authority is the power held by an agent or other actor to affect a principal’s legal relations with third parties when a third party responsibly believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations. Apparent authority rises out of the third party’s reasonable belief that an agent was authorized to perform a certain action, based on the principal’s conduct. Therefore the two elements required for apparent authority to exist are: First, circumstances must be created by the principal that reasonably result in a third party believing that the agent is authorized. Second, there must be actual and reasonable reliance by the third party upon these circumstances. The circumstances created by the principal that could induce the third party into this belief may be naming the agent to a certain position or giving the agent a title. There could also be apparent authority from inaction or silence, such as when the agent makes it known to the third party that he has authority to act on the principal’s behalf and the principal does not take any action to deny it.
Through inherent agency authority the principal will be liable by an agent’s unauthorized act if a third party reasonably relies on the claims by the agent that he has the authority to do that act. Inherent authority is geared towards holding an undisclosed principal and the third party.
Agency by Estoppel
Estoppel arises out of the failure of a person to perform an action that could have prevented harm to himself. Because he did not prevent the harm, he is estopped from asserting an otherwise valid claim, a person who has not made a manifestation that an action has authority as an agent and who is not otherwise liable as a party to a transaction purportedly done by the actor on that person’s account is subject to liability to a third party who justifiably is induced to make a detrimental change in position because the transaction is believed to be on the person’s account if (1) the person intentionally or carelessly caused such belief; or (2) having notice of such belief and that it might induce others to change their positions, the person did not take reasonable steps to notify them of the facts. Agency by estoppel thus takes place if the principal communicates the termination of the agent’s authority only to the agent, while failing to inform third parties or to undo any act that created an appearance of authority by the agent. The principal is estopped from objecting to any agreements made by the agent and therefore affecting his legal relations if the principal could have prevented the confusion over the agent’s authority
Agency by Ratification
A principal may confirm an agreement by an agent with a third party even if the agent does not have authority to establish that agreement. By confirming that agreement, the principal binds himself through ratification. Ratification is the affirmation of a prior act done by another, whereby the act is given effect as if done by an agent acting with actual authority. Even though the agent may take unauthorized actions for which he did not have authority and would normally not bind the principal, the principal may bind himself, if he accepts the benefits of the unauthorized act. Consequently, the agent acted with actual authority and as the principal’s representative when he interacted with third parties because the agent’s conduct was ratified.
A person ratifies an act by:
Manifesting assent that the act shall affect the person’s legal relations, or
Display of conduct that justifies a reasonable assumption that the person so consents. The principal does not necessarily need to expressly affirm or ratify an action by the agent: if he silently accepts the benefits of the unauthorized action by the agent then there is ratification of such action. If the principal does not take any action to impede the benefits from occurring then he is tacitly approving the action by the agent.
Authority by Judicial Act
A different kind of source of agency is authority granted by the court. That is, an authority to act on behalf of another may emanate from the court’s decision. Courts, upon evolvements of some conditions, may appoint some other person to do activities pertaining to another. This situation is not an agency either by a prior agreement of the parties or by the lawmaker. But it arises by the order of the court upon application. The person appointed by order of the court is called the curator. This appointment of curator is usually necessitated when the person whose interest(s) is (are) to be represented is not in a position to appoint an agent by reason of being away, ill or any similar causes. In these cases only limited persons (relatives, spouse and nobody) shall apply to a court with jurisdiction for the appointment of an agent to protect the interest of the person to whose benefit a curator is required. The Curator is expected to work for the interest of the person represented, and the court may give directions on how to carry out the obligations and may impose liability on the curator. The curator has to inform his appointment as soon as possible to the person he/she represents. The curator is a contractual agent for all the rights and duties.
Scope of Agency Authority
While agents must fulfill their fiduciary responsibilities, they must also act within the scope of their authority. Depending on the scope of the agent’s authority, an agent may be either a universal agent, general agent or a special agent. A universal agent has authority to represent the principal in all matters that can be delegated. The universal agent can enter into any contract on behalf of the principal without prior permission. He or she can act for the principal in a broad range of areas. This type of agency is often created by a written document known as a power of attorney. A general agent is empowered to represent the principal in a specific range of matters. The general agent may bind the principal to any contract within the scope of agent’s authority. This type of authority also can be created by a power of attorney. A special agent is authorized to represent the principal in one specific matter or transaction; the authority is both limited in scope and time. Once that transaction is concluded, the agency is terminated. A real estate broker is usually a special agent. If hired by the buyer, the broker’s duty is limited to finding a suitable property for the buyer. As a special agent has no authority to sign any contracts on behalf of the principal.