Why is an agent usually forbidden from competing with the principal?

In the context of agency law, an agent is generally forbidden from competing with their principal because the agent owes a fundamental fiduciary duty of loyalty to the principal.1

This duty requires the agent to act solely in the best interests of the principal. Because the agent is entrusted with decision-making authority and often handles confidential information, competing with the principal creates an inherent conflict of interest. Engaging in such competition—or maintaining unrevealed interests adverse to the principal—violates the trust placed in the agent and undermines the principal's objectives.12

Furthermore, the agent is prohibited from using or disclosing confidential information for any purpose other than the principal's benefit. By prioritizing the principal’s interests over their own, the agent fulfills their obligation to avoid "secret profits" and ensures that their actions do not detract from the faithful representation of the principal. Ultimately, these prohibitions exist to prevent the agent from placing their own self-interest ahead of the owner's, which would otherwise result in an unwanted agency cost.132