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Types of Agency Relationships

Agency is a relationship between a principal and an agent in which the principal confers his/her rights on the agent to act on behalf of the principal.  An agency relationship is fiduciary in nature and the actions and words of an agent exchanged with a third party bind the principal.

The most common agency relationships are:

  • Buyer’s Agency;
  • Seller’s Agency;
  • Dual Agency.

In a buyer’s agency relationship, the buyer is considered the client.  A buyer’s agent has to be loyal, maintain confidentiality, be obedient, provide reasonable care and diligence, and give accounting for all funds.

Similarly, a seller’s agency relationship represents the seller in the transaction and the seller is considered the client.  A seller’s agent is also known as a listing agent.  The seller’s agent possesses the same fiduciary responsibilities to the seller as the buyer’s agent has to the buyer.  In a seller’s agency, the client relationship is established through a listing agreement.

Whereas, in a dual agency, an agent represents both buyer and seller in a single transaction and carries fiduciary responsibilities to both principals.  The mistake of an agent acting as a dual agent becomes a mutual mistake of fact by both principals.  This prevents one principal to make the other principal liable for the mistake of the agent[i].  However, knowledge or notice to a dual agent is not imputed if the agent acted adversely or fraudulently[ii].  Dual Agency is only permitted with the informed and voluntary consent of both the buyer and the seller.

[i] Messall v. Merlands Club, Inc., 233 Md. 29 (Md. 1963)

[ii] Herdan v. Hanson, 182 Cal. 538 (Cal. 1920)

Inside Types of Agency Relationships