Why can't an agent take an opportunity meant for the principal? When is an agent permitted to take such an opportunity? Give an illustration of an agent's violation of his or her duty of loyalty.
What will be an ideal response?
An agent cannot personally usurp an opportunity that belongs to the principal. A third-party offer to an agent must be conveyed to the principal. The agent cannot appropriate the opportunity for herself unless the principal rejects it after due consideration. If the agent does so, the principal can recover the opportunity from the agent. But, the agent can take the opportunity with the consent of the principal. For instance, consider an agent who works for a principal that is in the business of real estate development. The principal is looking for vacant land to purchase to develop. A third party who owns and wants to sell his vacant land tells an agent of the principal of the availability of the land. The agent, without informing the principal, purchases the land for his own use. This is a violation of the agent's duty of loyalty.
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