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Breach of Trust is a Cause of Action Essay

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When a person (agent) binds himself to render some service on behalf and with the consent of another (principal) in transacting business with third persons, a contract of agency is thereby created. The contract of agency may be expressed or implied. Expressed, when the agreement is evidenced by a written agreement; implied when expressed indirectly by conduct or oral statement of exchange of promise.  In a contract of agency, the parties are under obligations to perform certain duties.  It is expected of the agent to carry out his responsibilities with utmost diligence, acting exclusively for the benefit of the principal.

From time to time, he has to update the principal on all matters concerning the agreement, and complying stringently with the instructions of the principal. On the other hand, the principal must be supportive of his agent by seeing to it that he is well-compensated, safe and

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duly indemnified for whatever expenses the agent may have incurred in pursuing the object of the agency contract (Chapter 13, Employment Relationships, Unit 4: The Employment Environment, 108).

In the case at hand, the agreement entered into between Kyle and Billy is a contract of agency.  Kyle, decided to expand his business, finds Albert’s property perfect for a new store location.  He hired Billy to negotiate and eventually buy the property for him.  Instead, Billy, realizing that the property is an excellent deal bought the property for himself, for his own benefit. Kyle’s objective in contracting the services of Billy was to minimize acquisition cost of the property, a mechanism ordinarily employed by businesses. Billy Bob did not comply with what is expected of him under the agreement

The issues involved are: (1) whether or not Billy is liable for breach of contract; (2) whether or not Kyle has a right to the property and (3) whether or not Kyle is entitled to damages. With Billy’s breach of trust, the business lost a business opportunity. For appropriating the property for himself, Kyle has a cause of action against Billy.  Kyle has acquired a proprietary interest to the property and can demand from Billy conveyance of the said property plus damages.

It is worthwhile to note that it was Kyle who found the location.  Billy knew pretty well that he will benefit from the purchase of the mentioned property, so he purchased it for himself instead of buying it for Kyle as per their agreement. This is tantamount to unjust enrichment, an improper use of the information conveyed to him by Kyle.

There is a resulting constructive trust because a trust is intended, the reason of the law being to prevent unjust enrichment to the prejudice of another person. Kyle instructed Billy not to tell Albert that he is working for him, it follows therefore that Billy will buy the property in his name and eventually convey the land to Kyle, who is the true purchaser and owner. Hence, trust is intended.

Billy holds a fiduciary relationship as agent of Kyle, therefore his acquisition inures to the benefit of the principal.  Here, he will be considered only a trustee, and the principal is the beneficiary.  The principal can bring an action for conveyance of the property to himself, so long as the rights of innocent third persons are not adversely affected. The reason for the rule is to remove the temptation to place self-interest above all other things and at the expense of one’s integrity and duty to another.

Work Cited

Chapter 13, Employment Relationships, Unit 4: The Employment Environment, 108

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