Oregon 30-Hour Real Estate Law Practice Test

What occurs to Max's agency coupled with interest if Rufus becomes incapacitated?

1. It gets terminated automatically

2. It remains in place despite the incapacity

3. It gets assigned to another agent

4. It will be renegotiated

The correct answer is: It remains in place despite the incapacity

In the context of agency relationships, an agency coupled with interest is a special type of agency where the agent has a vested interest in the subject of the agency. This means that the agent's authority is not simply due to the principal's grant of power, but also because the agent has a personal financial interest in the outcome. When considering what happens to Max's agency coupled with interest if Rufus becomes incapacitated, it remains in place despite Rufus's incapacity. This is because the agency coupled with interest is designed to be more durable and can survive changes in the principal's condition. The agent's rights are protected by virtue of their interest in the property, making the agency resilient to the principal becoming incapacitated. Thus, the correct answer reflects that the agency continues to exist, allowing Max to act on the interests tied to the agency relationship even in light of Rufus's incapacity. Other options, such as termination or assignment to a new agent, do not apply here due to the established nature of agencies coupled with interest.