When does an agent owe a duty of good faith to a principal?

An agent owes a duty of good faith to a principal in all related matters affecting the principal. This duty is fundamental to the principal-agent relationship and establishes that the agent must act in the best interests of the principal at all times, not just during specific circumstances or transactions. The scope of this duty emphasizes the importance of trust and loyalty in the relationship.

The duty of good faith entails that the agent must avoid conflicts of interest and must provide full disclosure of any relevant information that could affect the principal's decisions or the overall outcome of their engagement. This standard is consistent across various situations and emphasizes that the agent's obligations extend beyond isolated interactions, thereby fostering an environment of integrity and accountability throughout the entire relationship.

Other options indicate a limited scope of duty. For instance, suggesting that the agent's duty exists only during contract negotiations misrepresents the continuous nature of the fiduciary relationship. This option neglects the ongoing responsibilities that persist throughout the relationship duration. Similarly, asserting that the duty arises only when directed by the principal undermines the agent's proactive obligation to act in the principal's best interests without necessitating explicit direction. Finally, restricting the duty to high-value transactions fails to recognize that the duty of good faith is equally applicable in less significant dealings