Disclosure of information by agents: Overview, definition, and example
What is disclosure of information by agents?
Disclosure of information by agents refers to the obligation or right of an agent (a person or entity authorized to act on behalf of another, known as the principal) to share relevant information with the principal or other authorized parties. This information may include material facts, developments, or any information that could influence decisions or obligations under the agency relationship. The disclosure requirement ensures transparency, helps the principal make informed decisions, and upholds the agent’s duty to act in the best interests of the principal.
The disclosure of information may be outlined in agency agreements, contracts, or legal frameworks that define the agent's responsibilities. This can involve disclosing financial data, operational updates, legal matters, or any other significant information relevant to the principal’s interests.
Why is disclosure of information by agents important?
Disclosure of information by agents is crucial because it promotes transparency and trust between the agent and the principal. It ensures that the principal has all the necessary information to make informed decisions and take appropriate actions. Without proper disclosure, the principal could be unaware of issues or developments that affect their interests, leading to poor decision-making or legal disputes.
For agents, disclosing information is part of their fiduciary duty to act in the best interest of their principal. Failure to disclose material information could result in legal consequences, damage to the relationship, or claims of breach of trust.
Understanding disclosure of information by agents through an example
Imagine a real estate agent who is representing a client in the sale of a property. The agent discovers that the property has a zoning issue that could affect its value. In accordance with their duty, the agent is required to disclose this information to the client, the principal, so the client can make an informed decision about whether to proceed with the sale or address the zoning issue.
In another example, a financial advisor (acting as an agent) is managing investments on behalf of a client. The advisor learns of a market change that may impact the client’s portfolio. The advisor has a responsibility to disclose this information to the client so they can consider making adjustments to their investments.
Example of disclosure of information by agents clause
Here’s an example of how a disclosure of information by agents clause might be written in an agreement:
"The Agent agrees to disclose to the Principal, in a timely manner, all relevant information related to the Agent’s activities under this Agreement, including but not limited to any material developments, financial information, legal matters, or any facts that may reasonably affect the Principal's decision-making. The Agent acknowledges that the failure to disclose such information may result in a breach of fiduciary duty and may subject the Agent to liability for any resulting damages."
Conclusion
The disclosure of information by agents is an essential aspect of the agent-principal relationship, ensuring that the principal is informed of all relevant facts that may influence their decisions. Agents are required to share material information in a timely manner to uphold their fiduciary duty and maintain transparency and trust. Whether in real estate, finance, or any other agency relationship, clear provisions regarding disclosure are vital for the smooth and effective functioning of the partnership, protecting both the agent and principal from potential disputes or liabilities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.