Oregon 30-Hour Real Estate Law Practice Test

What determines the legal agency in a situation where Freida pays the commissions?

1. Freida's relationship with the buyer

2. Who signed the listing agreement

3. The size of the commission

4. The agreement terms between agents

The correct answer is: Who signed the listing agreement

The legal agency in real estate transactions is primarily determined by the listing agreement, which outlines the relationship and obligations between the parties involved. When Freida pays the commissions, it indicates that there is an established expectation of a legal relationship, but the crux of authority in any agency relationship hinges on who has signed the listing agreement. This document formally initiates the agency relationship, detailing the duties owed to the client, including loyalty and representation. The listing agreement serves as a contractual basis for the agent's authority to act on behalf of the client. This means that even if Freida pays the commissions, her legal agency is primarily governed by the terms of the listing agreement she entered into, which identifies the rights and responsibilities of the parties involved. Other factors such as the nature of Freida's relationship with the buyer, the amount of the commission, or the agreement terms between agents may play roles in a broader context of the transaction but do not establish the legal agency on their own. The critical component is the signed listing agreement, which clearly dictates the agency relationship.