An agent working under a general agency agreement sells a property and later discovers the purchaser was their undisclosed business partner. Which legal principles are most likely to apply in determining the validity of this transaction?
Correct Answer
D) The vendor may affirm or rescind the contract once the conflict is disclosed
Under agency law principles, undisclosed conflicts of interest give the principal the right to choose whether to affirm or rescind the transaction once the conflict is revealed. The vendor has been deprived of the agent's undivided loyalty and independent advice, making the transaction voidable at the principal's election.
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Previous Question
In a state whose law allows an agent to act for both the vendor and the purchaser with disclosure and consent (NSW, Queensland and SA do not), an agent doing so is told in confidence by the purchaser that their maximum budget is $50,000 above their current offer. What should the agent do?
Next Question
An agent working under a sole agency agreement learns that their principal is simultaneously negotiating directly with a buyer for a private sale. The agent has not yet introduced this particular buyer. Which statement best describes the legal position?