What happens to a listing agreement if the owner dies before it expires?

What happens to a listing agreement if the owner dies before it expires?

• A. It is binding on the owner's estate for the remainder of the 90 days.
• B. It remains in effect, as the owner's intention was clearly defined.
• C. It is binding only if broker Jones can produce offers to buy the property.
• D. It is terminated automatically upon the death of the principal.

Answer: (D)

The correct answer is that the listing agreement is automatically terminated upon the death of the principal. In real estate, a listing agreement is a contract between the property owner (the principal) and the real estate broker. This type of contract often requires the presence and capacity of the principal to be valid, meaning they must be alive and have the legal ability to enter into agreements. When the owner passes away, their personal ability to fulfill the terms of the listing agreement ceases. Unless there are specific provisions within the agreement that state otherwise, the contract does not extend to the owner's estate or heirs. Therefore, the agreement automatically terminates upon the death of the principal as all contractual obligations are inherently linked to the living party’s consent and ability to engage in contractual commitments. This understanding is critical because it affects how estates are managed and how the sale of properties is handled after an owner's death, particularly in relation to who has the authority to continue managing the transaction, if at all.

The correct answer is that the listing agreement is automatically terminated upon the death of the principal. In real estate, a listing agreement is a contract between the property owner (the principal) and the real estate broker. This type of contract often requires the presence and capacity of the principal to be valid, meaning they must be alive and have the legal ability to enter into agreements.

When the owner passes away, their personal ability to fulfill the terms of the listing agreement ceases. Unless there are specific provisions within the agreement that state otherwise, the contract does not extend to the owner's estate or heirs. Therefore, the agreement automatically terminates upon the death of the principal as all contractual obligations are inherently linked to the living party’s consent and ability to engage in contractual commitments.

This understanding is critical because it affects how estates are managed and how the sale of properties is handled after an owner's death, particularly in relation to who has the authority to continue managing the transaction, if at all.