Question

A principal told his agent to sell 3 acres of land in an orchard for $ 6 million, in return for a 1 percent of the sale proceeds as commission. The agent was aware that the price of the land was on the rise and it was well sought after by Singaporean investors, but he did not disclose it to the principal. The agent then told the principal he found a first buyer who was willing to buy for $ 6 million and sold the land. Several months later, the principal discovered that the same piece of land fetched a higher price and it was sold for $ 8 million by another buyer. Upon investigation, the principal discovered that the agent and the first buyer were actually friends. He also came to realize that both the first buyer and the agent shared the profits from the sale. Advise the principal on his rights. Support your answer with reference to the relevant statutory provision and case laws.

Answer 1

Guidance

With reference to case facts, the agent violated his fiduciary duties he owed the principal, and the principal is entitled for the constructive trust remedy or termination of agency agreement (voidance of their agency contract).

Explanation:

According to agency law, the common law (a case law) that regulate formation of agency relationships, an agent is liable for acting in the best interest of his or her principal, and if the agent violate the duty, then his or her principal has a legal right to terminate their agency agreement or seek constructive trust remedy.

Certainly, based on case facts, the agent had a fiduciary duty of loyalty to honor. He was supposed to act in the best interest of his principal. Instead, the agent lied to the principal about the market price of the land, sold the land on the market price, and gained some profits that he never revealed to the principal.

Therefore, because the agent acted with a purpose to meet his personal interests, and he failed to act in the best interest of the principal, as revealed in the Wall Sys. V. Pompa, 324 Conn. case, the agent violated his fiduciary duty of loyalty.

On the other hand, since the agent breached his duty of loyalty, the principal has a legal right to terminate their agency agreement: end their agency relationship. Also, the principal has a legal right to claim, from the agent, all the profits he gained from their agency relationship: constructive trust legal remedy.