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Where an agent has an interest adverse to that of his principal in a transaction in which he purports to act on behalf of his principal, the transaction is voidable by the principal unless the agent disclosed all material facts within the agent's knowledge that might affect the principal's judgment.
Jerry Argovitz, an agent for Billy R. Sims, a football player, was in negotiations with a team for the services of his client. As negotiations progressed, the agent's bid for a franchise in an opposing league was approved and the agent became a part owner of another football team. The agent's football team, Houston Gamblers, began negotiating for the services of Sims, and ultimately Sims signed with Houston Gamblers, having been led to believe that the original team seeking his services was not sincerely interested. Sometime thereafter, Sims filed an action seeking to invalidate the contract with Houston Gamblers arguing that the agent breached his fiduciary obligations to the client by not keeping the client informed of all of his options and failing to use the offer made by the agent's team to seek a better offer from the original team.
Did the agent breach his fiduciary duty to the client, thereby warranting the rescission of the contract between the client and the agent’s football team?
The court determined that the agent did in fact breach his duty to the client by failing to inform the client that the agent had an interest adverse to the client's and failed to negotiate with the original team in the client's best interest. The court determined that the conduct of the agent was so egregious that rescission was the only proper remedy.