Question 7

A principal MAY terminate an agency agreement when the parties mutually agree in writing.

Termination of an agency agreement can occur if both parties come to a mutual agreement in writing, which signifies that they are both willing to end the relationship on agreed terms.

A) broker presents an offer that the principal considers too low

This option is incorrect because a principal's dissatisfaction with an offer does not grant them the unilateral right to terminate the agency agreement. The principal may choose to reject the offer, but it does not equate to the termination of the agency relationship.

B) parties mutually agree in writing

This option is correct as it reflects the principle that both the principal and the agent can terminate their agreement by mutual consent. Such an agreement must be documented in writing to ensure clarity and legal enforceability.

C) principal dislikes one of the broker's salespersons

While a principal may have personal preferences regarding the individuals involved in the agency, dislike for a salesperson does not provide grounds for termination of the agency agreement unless it is stipulated within the terms of the agreement or unless the principal and the broker mutually agree to terminate it.

D) agency is coupled with an interest in the property

This option is incorrect because when an agency is coupled with an interest, it typically indicates that the agent has a vested interest in the property, which may restrict the principal's ability to terminate the agreement unilaterally.

Conclusion

The correct answer is B, as it emphasizes the importance of mutual consent in terminating an agency agreement. Options A, C, and D fail to provide valid grounds for termination, as they either reflect personal preferences or misunderstand the nature of agency agreements. Thus, mutual agreement in writing is the definitive method for a principal to terminate an agency relationship.