Fiduciary Duty
Definition
The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.
Example
A listing agent learns from a neighbor that the property sits on a former landfill. The duty of disclosure requires the agent to inform the seller of this material fact, and the seller must then disclose it to potential buyers.
Exam Tip
Memorize OLD CAR: Obedience (follow lawful instructions), Loyalty (client first), Disclosure (material facts), Confidentiality (protect private info), Accounting (handle money properly), Reasonable care (act competently). This appears on EVERY exam.
Related Agency Terms
Agency Relationship
A legal relationship in which one person (the agent) is authorized to act on behalf of another person (the principal) in business transactions with third parties.
Dual Agency
A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.
Designated Agency
An arrangement where a brokerage assigns separate agents within the firm to represent the buyer and seller in the same transaction, allowing each client to have dedicated representation.
Transaction Brokerage
A non-agency relationship where the broker facilitates a real estate transaction without representing either party, owing limited duties of honesty, fairness, and competence to both.
Agency by Estoppel
An agency relationship created when a principal's actions or words lead a third party to reasonably believe that an agent has authority, and the principal fails to correct this belief.
Agency by Ratification
An agency relationship created when a principal approves or accepts an agent's previously unauthorized actions, effectively granting authority after the fact.
Frequently Asked Questions
Test Your Agency Knowledge
Practice with exam-style questions to make sure you can apply Fiduciary Duty and other agency concepts.