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Agents owe their principals a duty to disclose certain information, and a duty to avoid gaining an interest adverse to their principal. It is true, of course, that under elemental principles of agency law, an agent owes his principal a duty of good faith, loyalty and fair dealing. Encompassed within such general duties of an agent is a duty to disclose information that is relevant to the affairs of the agency entrusted to him. There is also a corollary duty of an agent not to put himself in a position antagonistic to his principal concerning the subject matter of his agency. An agent who acquires a position adverse to the principal, but fails to disclose it, simultaneously breaches the duties of loyalty and care.
Loretta Eller entered into a real listing agreement with Wayne Bartron, a real estate agent. The initial buyer submitted a bid for the house and, the same day, hired the agent to serve as the initial buyer's agent for a second sale of the house. Later, the agent convinced the seller to accept the initial buyer's bid without disclosing his conflict of interest or the initial buyer's interest in flipping the house. In fact, a second buyer had entered into a contract to buy the house from the initial buyer one day before the seller signed the contract to sell the house to the initial buyer. The seller sued the agent, alleging a breach of fiduciary duties. The seller testified that the agent never told her that he had agreed to sell the house on behalf of the initial buyer or about the second sale. After one day of trial, the Superior Court of the State of Delaware in and for New Castle County granted the agent's motion for a directed verdict. The seller appealed.
Did the court err in granting the agent’s motion for a directed verdict?
The appellate court found that, since the agent owed the seller traditional fiduciary duties, the trial judge should have allowed the jury to determine if the agent breached his fiduciary duties, and if so, what damages occurred. According to the court, the agent's agreement to act for the initial buyer in the second sale affected the weight the seller should have assigned to his views, so the agent had a duty to refuse to act for the initial buyer until he secured the seller's consent. Accordingly, the judgment was reversed and the case was remanded for a new trial.