Humber/Ontario Real Estate Course 4 Exam Practice

In which situation does an agency relationship form by ratification?

1. When the buyer acknowledges the seller's terms

2. When the seller recognizes that the salesperson was acting on their behalf

3. When the salesperson gets written authorization

4. When the brokerage agrees to the signing

The correct answer is: When the seller recognizes that the salesperson was acting on their behalf

An agency relationship forms by ratification when a principal acknowledges and accepts the actions taken by an agent on their behalf after the fact. This means that even if the agent acted without prior explicit permission, the principal can later validate or confirm that those actions are acceptable, thereby establishing the agency relationship retroactively. In the context of the scenario provided, the seller recognizing that the salesperson was acting on their behalf signifies this acceptance. By acknowledging the salesperson's actions, the seller is essentially saying that they approve of what was done and agree to be bound by those actions, thus creating an agency relationship through ratification. The other scenarios do not strictly meet the criteria for forming an agency relationship by ratification. For instance, a buyer merely acknowledging the seller's terms does not imply a recognition of an agency relationship. Similarly, written authorization from the salesperson or agreement from the brokerage does not pertain to ratification—it represents prior consent rather than post-approval of actions taken without authority.