How is an agency relationship created?

• A. A principal manifests to an agent that the agent should act on the principal's behalf and under the principal's control, and the agent consents to act.
• B. A court orders an agency relationship to exist.
• C. An agency arises only when the parties sign a formal contract.
• D. An agency arises when the agent unilaterally acts on behalf of the principal.

Answer: (A)

Agency in real estate comes to life when the principal clearly shows to the agent that the agent should act for the principal and be under the principal’s control, and the agent agrees to take on that role. That mutual manifestation and acceptance creates the fiduciary relationship, giving the agent authority to represent the principal’s interests. This can be express, such as in a written listing or brokerage agreement, or it can arise implicitly from the parties’ conduct. It does not require a court order, and it does not rely on a formal contract alone, though a written agreement is common and often required by law for certain real estate transactions. It also isn’t created merely because the agent starts acting on behalf of someone; without the principal’s consent or ratification, the agent’s unilateral actions don’t establish a valid agency relationship.