Can an agent engage in self-dealing?

The correct choice is grounded in the fundamental principles of agency law, particularly regarding the fiduciary duties that agents owe to their principals. An agent has a duty to act in the best interest of the principal, which includes loyalty and full disclosure. Engaging in self-dealing means that the agent would be putting their own interests ahead of those of the principal, which constitutes a breach of the fiduciary duty.

Even if self-dealing is disclosed to the principal, it does not eliminate the inherent conflict of interest, as the agent may still be tempted to prioritize their own interests over those of the principal. This is why the act of engaging in self-dealing is generally considered a violation of the trust inherent in the agency relationship, regardless of disclosure or approval.

In contrast, allowing self-dealing based on the principal's consent or inclusion in a contract does not justify the action if it fundamentally undermines the agent's fiduciary obligation. Agents must maintain a standard of good faith and fair dealing, which is compromised through self-dealing practices. Therefore, the assertion that agents may not engage in self-dealing aligns with the legal expectations placed on them to uphold their fiduciary duty to the principal.