Authority of Agent to Bind Client to Sales Contract

QUESTION: I have a situation where a listing agent received an oral offer and conveyed it to the seller who accepted the offer amount and terms. The listing agent sent an e-mail to the buyer’s agent saying that the seller accepted the offer. The buyer’s agent then sent the listing agent a completed Offer to Purchase and Contract signed by the buyer. Before the seller signed the Offer, another offer came in for more money. The seller wants to know if there is a binding contract on the property because of the e-mail that was sent by the listing agent accepting the first buyer’s offer.

ANSWER: We do not believe the seller is bound to sell the property to the first buyer because of the listing agent’s email.

The law of agency in North Carolina provides that a principal will be bound by a contract made by its agent if the agent acts within the scope of his or her actual or apparent authority.

In North Carolina, absent special authority, a real estate agent does not have the power to bind his principal to a contract to convey real property. The standard listing agreement approved by NCAR does NOT confer authority on agents to bind their principals to real estate contracts. Absent evidence that the seller had executed any other agreement, such as a power of attorney, granting the listing agent that authority, the listing agent did not have actual authority to bind the seller to a contract.

As to whether the listing agent had the apparent authority to bind the sellers to a contract for the property, apparent authority has been defined by the courts as that authority which the principal has held the agent out as possessing or which he has permitted the agent to represent that he possesses. The principal’s liability is determined by what authority a person in the exercise of reasonable care was justified in believing the principal had conferred on his agent. The email from the listing agent to the buyer’s agent stating that the seller accepted the offer clearly would not, standing alone, give a person a reasonable belief that the seller was holding the listing agent out as having the authority to bind the seller to a contract. Absent other evidence that the seller either held the listing agent out as possessing authority to bind him in contract or permitted the listing agent to represent himself as having such authority, we do not believe the seller could be bound to a contract with the first buyer based on an apparent authority theory.

Although under these facts we do not believe the listing agent’s email bound the seller to a contract, note well that, depending on the specific circumstances, an email from a real estate agent could constitute a legally binding acceptance. Agents need to keep this in mind when they engage in electronic negotiations.

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Filed Under: Contract Law,