Helga owns a piece of real estate.She goes to Stranton Lace Bank to obtain a loan against the property.The bank makes the loan but requires Helga to sign a mortgage pledging the property as collateral for the loan.The mortgage agreement appoints the bank as Helga's agent.If Helga defaults on her payments, the agreement permits the bank to sell the property and recover the amount of the loan from the sale proceeds.What kind of agency exists between Helga and the bank?

Question

Quizplus · Accepted Answer

The mortgage agreement appoints the bank as Helga's agent, but with a special type of agency known as agency coupled with an interest. In this type of agency, the agent (bank) has a vested interest in the subject matter of the agency (property). This means that the agency cannot be terminated by the principal (Helga) unless the agent's interest is satisfied. In this case, the bank's interest is in recovering the amount of the loan from the sale proceeds of the property in case of default by Helga.

Helga Owns a Piece of Real Estate