Question 19

Agency may be terminated by disclosure of a conflict of interest by the agent.

Disclosure of a conflict of interest by the agent is a valid reason for terminating an agency relationship, as it can undermine the trust and fiduciary duty required in such agreements.

A) Discovery of a major defect in the property.

While discovering a major defect in the property may affect the contract's execution, it does not directly relate to the termination of the agency itself. The agency can continue until the contract is fulfilled unless other specific grounds for termination are evident.

B) Payment of a cancellation fee to the agent.

Payment of a cancellation fee may be part of certain agreements but does not inherently provide grounds for termination of the agency itself. The termination process is typically based on the nature of the relationship and the circumstances surrounding it.

C) Disclosure of a conflict of interest by the agent.

This option correctly identifies a circumstance under which an agency may be terminated. When an agent discloses a conflict of interest, it can compromise their ability to act in the best interest of their client, justifying the termination of the agency.

D) Lack of agreement by all parties to the contracts.

Lack of agreement among parties can lead to disputes or inability to perform under the contract, but it does not automatically terminate the agency. The agency may still exist until a formal termination is agreed upon or legally mandated.

Conclusion

The correct answer is that agency may be terminated by the disclosure of a conflict of interest by the agent, as this directly impacts the trust necessary for the agency relationship. Other options, while potentially relevant in different contexts, do not provide valid grounds for termination on their own. Thus, they fail to meet the core concept being tested regarding the conditions for ending an agency relationship.