Humber/Ontario Real Estate Course 4 Exam Practice

Why are buyer or seller representation agreements terminated if a brokerage's registration is revoked?

1. Due to illegality

2. Because of impossibility

3. Because the agreements have expired

4. Due to mutual consent

The correct answer is: Due to illegality

The correct choice is grounded in the principle that when a brokerage's registration is revoked, it signifies that the brokerage is no longer legally allowed to operate within its jurisdiction. This situation renders any existing buyer or seller representation agreements invalid—that is, illegal—since these agreements rely on the legal authority of the brokerage to act on behalf of its clients. When a brokerage's registration is revoked, it cannot fulfill its obligations under these agreements, as it is not recognized as a legitimate entity to facilitate real estate transactions. Legality is a fundamental element of contract enforceability, and therefore, the agreements terminate due to the violation of the legal framework that governs real estate practices. In understanding why the other options do not apply: impossibility refers to a scenario where a contract cannot be performed due to unforeseen circumstances, which doesn't directly relate to the revocation of a brokerage's license. Expiry of agreements typically refers to a contractual time limit, whereas revocation involves a change in legal status rather than a passage of time. Mutual consent implies that both parties agree to terminate the agreement; however, if a brokerage's authority is revoked, it implies more of a legal nullification than a mutual decision.