Agency is created when

• A. The principal delegates to the agent the right to act on his/her behalf in business
• B. An agency arises automatically upon employment
• C. An agency exists only when a written contract is signed
• D. The licensee becomes an agent only after a misrepresentation

Answer: (A)

Agency is created when the principal delegates to the agent the right to act on his or her behalf in business. That delegation gives the agent authority to represent the principal in real estate dealings, bind the principal to contracts, and handle negotiations. The key idea is that authority comes from the principal's grant, whether it's explicit (a listing or buyer representation agreement) or implied by the principal’s conduct showing that the agent has been authorized. It isn’t automatic simply because someone is employed, and a written contract isn’t always required for agency to exist. Misrepresentation, meanwhile, can create liability for the agent, but it doesn’t establish the authority or creation of the agency relationship.