4. Licensee A receives an offer below the listed price from Licensee B who works for the buyer. Licensee B tells Licensee A that the buyer loves the house and will pay full price. Has Licensee B violated the law of agency
Answer: B
Yes, because disclosing the buyer's intention is a breach of Licensee B's duty of loyalty
Licensee B's action of disclosing the buyer's intention to Licensee A constitutes a breach of the duty of loyalty owed to the buyer. This duty requires Licensee B to act in the best interests of the buyer, and revealing their intention to pay full price undermines that trust.
A) Yes, unless the Licensee A agrees to keep this disclosure from the seller
This option suggests that Licensee B could avoid violating the law of agency if Licensee A agrees to keep the disclosure confidential. However, the fundamental issue is that Licensee B’s disclosure itself compromises the buyer's position, regardless of any agreement with Licensee A.
B) Yes, because disclosing the buyer's intention is a breach of Licensee B's duty of loyalty
This option correctly identifies that Licensee B has violated their duty of loyalty by revealing the buyer's willingness to pay full price. Such a disclosure can harm the buyer’s negotiating position, which is why it constitutes a breach of agency law.
C) No, because Licensee B's disclosure was made to another licensee, not to a principal
While the disclosure was made to another licensee, it does not absolve Licensee B from the obligation to protect the buyer's interests. The duty of loyalty applies regardless of the audience of the disclosure; thus, this rationale is incorrect.
D) No, because Licensee B's disclosure is in the principal's best interest
This option incorrectly assumes that disclosing the buyer’s intention serves the principal's interests. In reality, it compromises the buyer's negotiating leverage and could lead to unfavorable outcomes for the buyer, indicating a clear violation of the duty of loyalty.
Conclusion
The correct answer is B, as it highlights the breach of duty of loyalty by Licensee B in disclosing confidential buyer intentions. The other options fail because they overlook the fundamental responsibilities of agency law, which prioritize the interests of the principal over any casual disclosures made to other parties. Thus, Licensee B's actions were not only inappropriate but also legally questionable.