Question 81

The listing agreement is automatically terminated if the improvements on a property are destroyed in a fire.

When the improvements on a property are destroyed by a fire, the listing agreement is automatically terminated because the subject matter of the agreement—the property itself—no longer exists in its intended form.

A) It is automatically terminated.

This option is correct because the fundamental basis of the listing agreement is the property and its improvements. If these improvements are destroyed, the agreement cannot be fulfilled as originally intended, leading to automatic termination.

B) It is terminated after the principal pays the agent for her expenses to date.

This option is incorrect as the termination of the listing agreement does not depend on the payment of expenses incurred by the agent. When a property is destroyed, the agreement ceases to exist regardless of any financial obligations.

C) It automatically covers any new real estate transactions on the part of the principal for the duration of the listing period.

This option is incorrect because a listing agreement cannot cover new transactions if the original property is no longer available. The destruction of the improvements nullifies the basis for any further transactions under that agreement.

D) It remains intact for the duration of the listing period.

This option is incorrect because the listing agreement cannot remain intact if the property has been destroyed. The agreement is contingent upon the existence of the property and its improvements, so its status cannot persist in the absence of the property.

Conclusion

The correct answer is that the listing agreement is automatically terminated if the improvements on the property are destroyed in a fire. This is because the core of the agreement relies on the existence of the property, and without it, the terms of the agreement can no longer be fulfilled. All other options fail to recognize the fundamental relationship between the property and the listing agreement.