What is the "conflict of interest" in agency law?

In agency law, a "conflict of interest" arises when an agent's personal interests clash with their obligations to act in the best interests of the principal. This situation can undermine the trust inherent in the agency relationship, as the agent may be tempted to prioritize their own benefits over those of the principal.

For example, if an agent is representing a client in the sale of a property but also has a personal financial interest in promoting a different property, this creates a conflict of interest. The agent is expected to act loyally and faithfully toward the principal, making decisions based solely on the principal's interests rather than their own.

Recognizing and managing conflicts of interest is crucial to maintaining ethical standards within the agency relationship. It ensures that clients can trust their agents to act on their behalf without being swayed by personal gains. Understanding this concept is key for anyone working within a legal or business context where agency relationships are prevalent.