22. Fiduciary obligations.—As we have already seen, an agent stands in a relation of confidence to ward his principal ; and from a person in a position of confidence is always exacted the utmost good faith and fair dealing. He cannot act for both parties tb a transaction and accept a commission from each with out their full knowledge and consent. Otherwise the interests of one or the other are likely to be in jeop ardy; and an agent, owing to his position of trust, must not and cannot place himself in the way of temp tation. If he is instructed to sell a property, he may not himself become the purchaser—at least before he has obtained the consent, based upon as full knowl edge of the facts as he has himself, of his principal, who otherwise could repudiate the transaction as ir regular.
Nor could an agent authorized to buy a certain property for his principal be himself the vendor, un less again after full disclosure. His profit would be secret and illegal; and the transaction could be set aside by the principal tho he had not thereby lost a cent. So also where an agent, authorized, for ex ample, to buy one thousand bushels of wheat, stipu lates with the vendor for a profit in consideration of his getting the sale in preference to another, such a profit is in the nature of a bribe, and the principal may repudiate the contract of purchase. Perhaps the reasoning behind the rule is that, if the vendor can afford to give a secret bribe to the agent, he can af ford to sell just so much cheaper to the principal, who under the circumstances is entitled to any shad ing of prices. Again if an agent is employed to buy a property and he purchases for himself, he is re garded as a trustee for his principal: he cannot set up any title so acquired against the absolute right of the principal to have the mandate fulfilled.
The courts are very strict in refusing to counte- , nance any act of an agent which conflicts, however slightly, with his position of trust. For example, where T, while professing to act as M's agent and stipulating for a commission, by a devious course of conduct, took from M an agreement of sale to him self T, of certain land, resold it to G, at a price higher than that at which he represented to M that he had sold it, paid over to M a smaller sum, less the agreed commission, and divided the balance with A, who was alleged to have been his partner in the transaction. It was held that M was entitled to re cover, not only the profit made by T including the commission, but the amount paid to A. All moneys paid by G- to T were received by T in trust for his principal, Similarly, a secret arrangement between the re spective agents of the vendor and the purchaser of property, that a price larger than that which the ven dor is willing to accept shall be demanded from the purchaser, and that the surplus shall be paid by the vendor to the agents, will not be countenanced by the court, and the purchaser, having paid the full price demanded, without knowledge of the secret arrange ment, is entitled to recover such surplus.' A principal must refund to the party with whom his agent contracted on his behalf any profit in the transaction represented by the money he has received thru the fraud of his agent, whether the principal authorized the fraud or not.' 23. Liability of agent to principal.—An agent is only an instrument and represents another. As to ward his principal he incurs no personal liability whatever be his due and proper execution of the man date. The third person with whom he dealt may not
fulfil his contract, may become insolvent or repud iate his agreement—that is no affair of the agent. By common usage, of course, an insurance broker is liable to an insurance company for premiums payable upon policies written by him; and a del credere agent, from the nature of his contract, guarantees fulfilment of the transaction which is the subject of his agency.
But an agent will in all cases be liable to his princi pal for the damages resulting from his negligence or carelessness, his unauthorized acts or other breach of duty.
Hence, in an action on a fire insurance policy, the insurer may recover from its agent (as damages for the latter's neglect of duty as the insurer's agent, to give the insurer sufficient information of the haz ardous nature of the risk, resulting in too small a premium being charged) the difference between the accustomed premium which would have been charged on a proper discovery of the material facts Down to the agent, and the lower premium which was in fact charged upon his negligent classification of the A person was employed to secure additional insur ance on a certain property. A correct specification of what was required was given to him. He received the policy from the underwriters and forwarded it to his clients without reading it. The policy contained an erroneous statement of the prior insurance carried by them. As. a result, when a fire occurred, they were forced to compromise their claim against the insurer. It was held that the agent was liable for the damages suffered by them.' And again, if an agent neglects to keep his princi pal's money separate from his own, and, in fact, de posits it in his private account at his bank, and the bank fails, the agent has been held liable.' And an auctioneer who sells property under condi tions requiring the payment of an immediate deposit, has been held liable in an action for negligence if he permits the highest bidder to go away without paying the An agent will not be liablewhere he has done an au thorized act which in itself may be imprudent and which may result disastrously to the principal. Nor will he be liable where damage results from his ac tions when he has literally followed his instructions; or where, in the absence of instructions, he has exer cised his best judgment and was entitled to use his discretion, or has acted under the best obtainable ad vice or according to the usage of the particular busi ness. If on his premises a principal orders work to be done lawful in itself, but from which, in the natural course of things, injurious consequences to his neighbor must be expected to arise, unless means are adopted by which such consequences may be pre vented, the principal himself is bound to see to the doing of that which is necessary to prevent the mis chief. He cannot relieve himself of his own responsi bility by employing someone else (whether servant or independent contractor) to do what is necessary to prevent the act he had ordered to be done from be coming It has been held that an agent who had no au thority to bind an insurance company, until it had ap proved an application for insurance, is not liable for failure to effect insurance upon property before it was destroyed by fire, where he agreed with the applicant only to submit his application to the company for ap proval, which he did without negligence, and it did not appear that he unconditionally agreed to place and effect such insurance.' .