Real Estate Council of Alberta Fundamentals Practice Exam

What is meant by 'operation of law' in the context of ending a representation relationship?

1. It involves mutual agreement between parties

2. It terminates contracts that are impossible to fulfill

3. It is a method of legal appeal

4. It requires a court decision for termination

The correct answer is: It terminates contracts that are impossible to fulfill

'Operation of law' refers to circumstances in which a representation relationship or contract is terminated not through the explicit actions or mutual agreement of the parties involved, but rather due to legal principles or statutes that automatically bring the relationship to an end. This can occur in scenarios where the contract becomes impossible to perform, such as when the subject matter of the contract is destroyed or becomes illegal. This concept acknowledges that certain legal circumstances create an automatic effect that impacts the validity of a contract, thereby dissolving the relationship without the need for mutual consent or court intervention. It reflects the way legal systems can impose outcomes based on the nature of the law rather than the choices of individuals involved in a contract. In contrast, mutual agreement between parties signifies a voluntary decision from both sides to end a relationship, which does not fall under the umbrella of 'operation of law.' Similarly, legal appeals or court decisions involve processes dictated by the legal system but do not automatically terminate a contract unless a specific judgment is made by a court. Therefore, the correct understanding of 'operation of law' focuses on situations like impossibility of fulfillment, leading to automatic termination.