Final answer:
The status of the agency relationship is likely terminated due to impossibility since it is unreasonable to expect the agent to sell the property at the initial 'firm' price after a substantial decrease in property value.
Step-by-step explanation:
The question relates to the status of the agency relationship between Morgan, an agent, and Drew, the principal, given a substantial decrease in property value due to zoning changes. If Morgan was instructed to sell Drew's property for a 'firm' price of 450,000, but the property's value has now decreased to 75,000, it is unlikely that the agency relationship would continue based on the original terms.
The most applicable scenario would be the first option: agency is terminated due to impossibility. This impossibility arises because it would be unreasonable to expect the agent to perform the task of selling the property at the originally mandated price when the property's value has diminished significantly.
Contracts, including agency agreements, can be discharged on the grounds of impossibility when events occur that are neither party's fault and render the performance of the contract substantially different from what was agreed upon. Therefore, unless Drew and Morgan come to a new agreement, the agency relationship, based on the specified 'firm' price, cannot continue in its current form.
The examples of Freda and Ben buying houses indicated that property values can fluctuate, which is related to the concept of changes in value affecting agreements in real estate. However, these examples do not directly relate to the agency relationship in question.