First Principles of Business Law

5. An agent's duties to their principal

5.4. The duty to act in good faith

Read the facts below, and then answer the questions.

A wants to sell his house. He engages B as his agent, promising to pay him a commission of $10,000 if he can find a buyer within two weeks who is prepared to pay $200,000 for the house. B does not tell A that he has already been engaged as an agent by C who wishes to buy a house as quickly as possible. C has promised to pay B a commission of $5000 if he can quickly find a suitable house for sale at up to $250,000. Wishing to maximise this opportunity, B decides to offer to buy A's house himself for $200,000, and then resell it to C for $250,000. That way, he reasons, he will be entitled to be paid commission by both A and C, and he will make an additional profit of $50,000.

1. In these circumstances, is B obliged to inform A of what he intends to do?

2. Is B entitled to make the profits he intends to make without telling A?

3. Does it matter that B is, to some extent at least, pursuing interests of his own, rather than A's interests?