Oregon 30-Hour Real Estate Law Practice Test

Under which condition may agency be legally terminated?

1. The client changes their mind about selling

2. The broker becomes incapacitated

3. The property is sold

4. The market conditions change

The correct answer is: The broker becomes incapacitated

When considering the termination of an agency relationship, one key factor that legally concludes this relationship is the incapacity of the broker. Agency agreements are predicated on the ability of both parties to perform their duties. If a broker becomes incapacitated, they are unable to fulfill their responsibilities, such as negotiating or managing the sale of property. This incapacity disrupts the fundamental operation of the agency agreement, thus terminating the legal relationship between the agent and the client. In contrast, while a client changing their mind about selling may lead to a practical termination of the relationship, it doesn't legally nullify the agency unless explicitly communicated and documented. Similarly, the sale of the property does indeed terminate the agency relationship, but the question focuses on conditions that may arise outside of an action taken by the client or the agent in the case of property transactions. Additionally, changes in market conditions might impact an agency's effectiveness, but they do not terminate the agency itself. Therefore, the broker's incapacity stands out as a clear, legal ground for termination of the agency.