Gagnon & Combs Case Study-Business Law

Joan Coombs did not have the right to convey the Shelburne farm to a trust that she had established and violated basic agency principles in this transaction. Joan violated her fiduciary duty as an agent to Gagnon by not acting in good faith and candor as well as putting her needs first in order to benefit her, absent of any benefit to Mr. Gagnon. An agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency relationship. In addition, her durable power of attorney was effectively revoked when she was notified that her father has sold the New Hampshire property. Joan was further ordered by the principal to return the property and she refused to follow this directive. An agent must obey the principal's instructions unless those instructions call for behaving illegally or unethically.

In an agency relationship where the principal has signed over power of attorney to an agent, then the principal enters into an agreement to sell property to a third party and the agent has knowledge of this agreement it is then considered adequate constructive, perhaps actual notice that the principal has terminated the agents authority with respect to that particular real estate transaction. An agent has a fiduciary duty of loyalty to the principal who places confidence in the agent who in turn is obligated to act in good faith and with honesty as well as putting her own needs second. The agency relationship is intended to benefit both the principal and the agent and there is a mutual consent that the agent act on the principal's behave and be subject to the principal's control. The agent also has an obligation to provide the principal with all necessary information within her possession that the principal would want to know. In this case, Joan conveyed the property to a trust that she created and controlled upon learning of her father's agreement which makes the conveyance void. The conveyance was revocable and the property belongs to Mr. Gagnon and not the trust Joan established.

Reference

Beatty, F. J, & Samuelson, S.S.(2010)Introduction to Business Law. South-Western Cengage Learning

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