Agent Locked into “Confidentiality” without a Signed Contract
Consider the following scenario:
· Bob wishes to sell his house
· It had been used by Bob’s Tenant to grow Marihuana
· Bob invites 3 Agents to make listing Presentations
· The first two Agents, Maureen and Bill said this information would have to be disclosed
· Bob then hired Roger, who doesn’t know
Now, the actual problem. Bill has a client Fred who wishes to see the property and submit an Offer.
Is Bill allowed to tell Fred what he knows?
It is important to appreciate that Bill has certainly obligations to Bob when making a “pitch” for his business. This would be an agency appointment and in securing information in the context of the agency discussion, the fiduciary obligations of an agent apply.
That means: Obedience, Loyalty and Confidentiality. If Bob wants the information to be “secret”, then that is precisely what is to happen whether or not Bill subsequently is retained on the Listing.
So, that would be an agency appointment, but that doesn’t mean that there was no agency appointment at the outset. This was implied agency. It had all the usual agency parameters. It just wasn’t an express agreement, nor was it reduced to writing.
A patient discloses certain information privately to a doctor. The patient then has surgery performed by another doctor. The first doctor is not allowed to post the confidential information on the internet.
Similarly, a murder suspect confesses the murder to three lawyers whom he considers to retain. Ultimately, he selects one. The other two lawyers are bound by solicitor client privilege not to disclose the murder confession.
This raises an interesting issue. Fred wants to buy the property and has retained Bill.
The ordinary quick answer would be that Bill is obligated to make full disclosure to Bill. The problem really is that this information arrived in a confidential envelope.
The best course of action would be that Bill doesn’t act for Fred. In fact, this would be “multiple representation”. Again, the ordinary rules would call for full disclosure. But, remember, Bill needs Bob’s consent first. There’s no multiple representation unless Bob agrees first, and since he wants the information to remain confidential, Bob will refuse. That means Bill can’t act for Fred in this deal.
What should Bill have done in the first place to protect his relationship with Fred, assuming that it was first?
Bill should have read Bob his rights:
“Anything you say, can and will be used against you….”
That would set the parameters. Bob would not reveal any confidential information. He would be guarded with respect to what he said, which, of course, would be fine.
Bill could have controlled the discussion and the implied fiduciary obligations right from the outset. He didn’t in this scenario. That’s his fault. We can’t blame this on Bob. Bill is the professional here.
Brian Madigan LL.B., Broker