When we hear the word agent
our first thoughts are of real estate agents. However, an agent in a legal
sense actually covers an expansive range of relationships between a person or
company (an agent) and another (referred to as a principal) who has undertaken
to serve their best interests.
Whether or not a
relationship of agency exists is a question which the courts approach
objectively[1].
There are many examples of established
agency relationships. Here are a few;
·
Real
estate agent and client
·
Solicitor
and client
·
Employee
and employer
·
Joint
venturers (to each other)
·
The
director of a company (to the company)
Scope
of an agent’s duties
While the scope of the
duties owed by an agent to their principal will vary depending on the type of
agency, a fundamental duty of an agent is not to use their position to make a
gain for themselves without the knowledge and assent of the principal[2].
An agent should
consider if there is any personal interest in the matter which might conflict
with the duty owed to the intended principal and, if so, he or she should
decline to act as agent without the fully informed consent of the principal[3].
Profit
from position and secret commissions
If an agent is aware
of any circumstances which might influence their client’s decision to enter
into a negotiation, and fails to disclose that information to their client, the
commission may be forfeited[4].
If the agent does
receive profit as a result of that non-disclosure, these profits are recoverable
by the principal on learning the true facts[5].
Should an agent
receive a secret commission or profit the principal may recover it as well as
dismiss the agent[6].
Application
to Real Estate
Let’s apply this to a real
estate transaction, where agencies most commonly arise.
Perhaps you have heard
of agents who desired to act for both a buyer and seller and to obtain
commission from both. It is the duty of the agent to make full disclosure to both
the buyer and seller of an intention to act for, and receive payment from, the
other party. Both parties must be made fully aware of this intention and agree
to the agent doing so[7].
In the event the agent does not tell both parties, or does not gain their
consent, the commission will be lost.
These obligations apply in addition to any PAMDA or POA obligations.
