8.06 Principal's Consent

(1) Conduct by an agent that would otherwise constitute a breach of

duty as stated in 8.01, 8.02, 8.03, 8.04, and 8.05 does not constitute a

breach of duty if the principal consents to the conduct, provided that

(a) in obtaining the principal's consent, the agent

(i) acts in good faith,

(ii) discloses all material facts that the agent knows, has

reason to know, or should know would reasonably affect the

principal's judgment unless the principal has manifested that

such facts are already known by the principal or that the

principal does not wish to know them, and

(iii) otherwise deals fairly with the principal; and

(b) the principal's consent concerns either a specific act or

transaction, or acts or transactions of a specified type that could

reasonably be expected to occur in the ordinary course of the agency

relationship.

(2) An agent who acts for more than one principal in a transaction

between or among them has a duty

(a) to deal in good faith with each principal,

(b) to disclose to each principal

(i) the fact that the agent acts for the other principal or

principals, and

(ii) all other facts that the agent knows, has reason to

know, or should know would reasonably affect the principal's

judgment unless the principal has manifested that such facts

are already known by the principal or that the principal does

not wish to know them, and

(c) otherwise to deal fairly with each principal.

Comment TTT

b. In general. This section defines the circumstances under

which conduct of a principal is effective as consent to conduct by an

agent that would otherwise constitute a breach of the agent's duties

of loyaltY

Instructions: BUSINESS LAW

hone in on the implications of section 8.06.

Here's what to do:

Recall particularly section 8.06 regarding Principal Consent. In this section, it is stated that "Conduct by an agent that would otherwise constitute a breach of duty . . . does not constitute a breach of duty if the principal consents to the conduct . . ." and goes on to explain the circumstances in which this is true.

After , answer the questions below in a post to this forum.

• Re-read sections 8.06 and its description.

1. Why does the law not just prohibit these transactions rather than allow them with consent and disclosure?
2. What do you think the law should be?