Maryland Home Improvement PSI Practice Exam

Under the common law of agency, licensees owe the broker with whom they are associated all of the following duties EXCEPT _________?

1. Loyalty.

2. Competence.

3. Indemnification.

4. Full disclosure.

The correct answer is: Indemnification.

Licensees owe their brokers certain fundamental duties based on the common law of agency, which are essential in maintaining trust and effectiveness in their professional relationship. These duties include loyalty, competence, and full disclosure. Loyalty is a critical duty that requires licensees to act in the best interest of their broker, prioritizing the broker's interests above their own. Competence involves performing their tasks effectively and with due diligence to ensure that they meet the standards expected in their role, which helps protect the brokerage’s reputation. Full disclosure is another crucial responsibility where licensees must inform their brokers of any relevant information that may affect their work or the business relationship. This transparency is vital for effective collaboration and decision-making. Indemnification, while it is a legal term often associated with responsibilities in certain contractual or liability scenarios, is not typically listed as a specific duty owed by licensees to their brokers under common law. This duty generally outlines that parties may compensate each other for losses or damages incurred. Therefore, it does not fit within the core duties required by licensees under the common law of agency. Understanding the nuances of these duties helps licensees navigate their responsibilities effectively in the field of real estate.