Why must an agent disclose conflicts of interest to a principal?

In the context of agency law, an agent is considered a fiduciary, meaning they occupy a position of power and confidence that requires them to act solely in the best interests of their principal.12

An agent must disclose conflicts of interest because they have a fundamental duty of loyalty to their principal. This duty mandates that the agent prioritize the principal’s interests above their own or those of any third party. When an agent has an interest that is adverse to the principal, failing to reveal it constitutes a violation of this fiduciary duty.23

Specifically, disclosure is required for the following reasons:
* Preventing Secret Profits: Agents must account for any financial benefit they derive from a transaction; unrevealed interests can lead to unauthorized personal gain at the principal's expense.2
* Ensuring Informed Consent: Disclosure allows the principal to understand potential biases, enabling them to make informed decisions about whether to proceed with the agent's services despite the conflict.4
* Maintaining Integrity: The relationship is built on trust; transparency ensures the agent does not compete with the principal or use confidential information for purposes other than the principal's benefit.2